Word of the Day
Futures Terms that begin "D"
Day Trader
A trader, often a person with exchange trading privileges, who takes positions and then offsets them during the same trading session prior to the close of trading.
Day Trading Strategy
An overall trading strategy characterized by the regular transmission by a customer of intra-day orders to effect both purchase and sale transactions in the same security or securities.
Deflation
A general decline in prices, often caused by a reduction in the supply of money or credit. Deflation can be caused also by a decrease in government, personal or investment spending. The opposite of inflation, deflation has the side effect of increased unemployment since there is a lower level of demand in the economy, which can lead to an economic depression. Declining prices, if they persist, generally create a vicious spiral of negatives such as falling profits, closing factories, shrinking employment and incomes, and increasing defaults on loans by companies and individuals. To counter deflation, the Federal Reserve (the Fed) can use monetary policy to increase the money supply and deliberately induce rising prices, causing inflation. Rising prices provide an essential lubricant for any sustained recovery because businesses increase profits and take some of the depressive pressures off wages and debtors of every kind.
Delta
The sensitivity of an option price to moves in the price of the underlying asset.
Derivative
The collective term for a future or call or a put option, the price of which is derived form the value of the underlying asset.
Derivatives
A financial instrument, traded on or off an exchange, the price of which is directly dependent upon the value of one or more underlying securities, equity indices, debt instruments, commodities, other derivative instruments, or any agreed upon pricing index or arrangement. Derivatives involve the trading of rights or obligations based on the underlying product but do not directly transfer property. They are used to hedge risk or to exchange a floating rate of return for a fixed rate of return.
Designated Self-Regulatory Organization(DSRO)
When a Futures Commission Merchant (FCM) is a member of more than one Self-Regulatory Organization (SRO), the SROs may decide among themselves which of them will be primarily responsible for enforcing minimum financial and sales practice requirements. The SRO will be appointed DSRO for that particular FCM. NFA is the DSRO for all non-exchange member FCMs.
Disclosure Document
The statement that must be provided to prospective customers that describes trading strategy, fees, performance, etc.
Discretionary Account
An arrangement by which the holder of an account gives written power of attorney to someone else, often a commodity trading advisor, to buy and sell without prior approval of the holder; often referred to as a "managed account" or controlled account.
Disequilibrium
A situation where internal and/or external forces prevent market equilibrium from being reached or cause the market to fall out of balance. This can be a short-term byproduct of a change in variable factors or a result of long-term structural imbalances. This theory was originally put forth by economist John Maynard Keynes.
Many modern economists have likened using the term "general disequilibrium" to describe the state of the markets as we most often find them. Keynes noted that markets will most often be in some form of disequilibrium - there are so many variable factors that affect financial markets today that true equilibrium is more of an idea; it is helpful for creating working models, but lacks real-world validation.
Distressed Securities
Distressed Securities strategies invest in, and may sell short, the securities of companies where the security's price has been, or is expected to be, affected by a distressed situation. This may involve reorganizations, bankruptcies, distressed sales and other corporate restructurings. DependDepending on the manager's style, investments may be made in bank debt, corporate debt, trade claims, common stock, preferred stock and warrants. Strategies may be sub-categorized as "high-yield" or "orphan equities". Some managers may use leverage. Fund managers may run a market hedge using S&P put options or put option spreads.
Distribution of Monthly Returns
This report displays the number of months in which a trading program's monthly performance historically has fallen within varying performance increments.
Drawdown
An investment is said to be in a drawdown when its price falls below its last peak .The drawdown percentage drop in the price of an investment from its last peak price. The period between the peak level and the trough is called the length of the drawdown period between the trough and the recapturing of the peak is called the recovery. The worst or maximum drawdown represents the greatest peak to trough decline over the life of an investment.
Drawdown Report Specifics
A drawdown is defined as a loss of equity from a peak to valley in a single month or period of consecutive months.
The Drawdown Report presents data on the percentage drawdown's during the trading program's performance history ranked in order of magnitude of loss.
Depth: Percentage loss from peak to valley
Length: Duration of drawdown in months from peak to valley
Recovery: Number of months from valley to new high
Start Date: Month in which peak occurs
End Date: Month in which valley occurs.
Duration
A measure of a bond's price sensitivity to changes in interest rates.
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