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Diagonal
Spread
An investment strategy that entails buying or selling of two different
option positions of the same class (two call positions or two put positions
in the same stock). Both the strike prices and the expiration dates of
the options are different. For instance, a three month ABC call sold with
a strike price of 30 and a two month call sold with a strike price of
25. Investors gain or lose as the difference in price narrows or widens.
See: Calendar
Spread; Vertical
Spread
Digits
Deleted
Specification on the exchange tape indicating that some digits are not
being displayed because the tape is delayed. For example, 15 1/4...15
3/8...26 1/8 becomes 5 1/4... 5 3/8... 5 1/8.
See: Late
Tape; Tape
Dilution
The effect on book value per share and earnings per share if all stock
options or warrants are exercised or all convertible securities are converted.
See: Convertible
Securities; Warrant
Dip
After a security's prolonged up-trend, a small drop in its price. Analysts
frequently advise investors to buy on dips because it is seen as only
a temporary price weakness.
See: Technical
Analysis
Director
An individual elected by corporate shareholders to serve on that corporation's
Board of Directors. The Board of Directors decide when dividends will
be paid, appoint the corporation's president, vice president and all other
officers.
Direct
Participation Program (DPP)
A business venture, usually organized as a limited partnership, that is
structured to pass-through income and "tax losses" of the underlying
investments to investors. However, its use as a tax shelter has been severely
reduced by tax legislation.
See: Limited
Partnership
Direct
Placement
Securities directly sold to one or more professional investors.
Disbursement
Money paid out to discharge a debt or an expense.
Discharge
of Bankruptcy
Order ending bankruptcy proceedings. It usually releases the debtor of
any legal liability for specific obligations.
Discharge
of Lien
Order removing a lien on property after the claimant has been paid or
the debt is otherwise satisfied.
Disclosure
Document
A pamphlet published by the Options Clearing Corporation (OCC) that outlines
the risks and uses of options trading.
See: Options
Discount
1: A bond that trades in the market at a price below its face or redemption
value. A bond selling below par is said to be "selling at a discount."
See: Discount
Bond; Par
2: Securities,
such as treasury bills, that are issued for less than their face value
and mature at face value. At maturity, the difference between the purchase
price and the face value is the interest.
See: Original
Issue Discount; Zero
Coupon Security
3: To evaluate
a security's current price, all applicable news and information about
the corporation are used.
4: Relationship
between two countries' currencies. For example, the French Franc may sell
at a discount to the German Mark.
Discount
Bond
Bond trading for less than its redemption value.
See: Deep
Discount Bond
Discount
Broker
A brokerage firm that executes buy and sell orders at lower commission
rates than those charged by a full service broker.
See: Full
Service Broker
Discounted
Cash Flow
Future value of anticipated cash receipts and expenditures on a specified
date. It is computed using net present value (NPV) or internal rate of
return (IRR) and is a consideration in analyses of capital and securities
investments. The NPV method uses a discounted rate of interest based on
the marginal cost of capital to future cash flows to bring them into to
the present. The IRR formula finds an investment's average return for
the life of the investment. It identifies the discount rate that matches
the present value of future cash flows to the investment's cost.
Discounting
the News
The act of bidding a stock's price up or down in the anticipation of news
about the stock's corporate financial outlook. This process may occur
regardless of whether the news is good or bad.
Discount
Rate
The rate of interest charged by a Federal Reserve Bank on a loan to a
member bank, using government securities or eligible paper as collateral.
See: Eligible
Paper
Discount
Window
Federal Reserve location where banks can borrow money at the discount
rate.
See: Discount
Rate
Discount
Yield
Yield on a security sold at a discount--most notably T-bills. To calculate
the annual yield, divide the discount by the face amount and multiply
that number by the approximate number of days in the year divided by the
number of days to maturity.
See: Yield
To Maturity
Discretionary
Account
A type of brokerage account whereby clients authorize their broker to
buy and sell securities or commodities when the broker deems it is appropriate.
The broker will decide when and which securities, the amount of shares,
and price to be paid or received without the client's prior knowledge
or consent. Some clients may set guidelines for the broker, such as limiting
the type of securities in which to invest.
See: Discretionary
Order
Discretionary
Income
The amount of income leftover after essential commitments, such as housing
and food, have been paid. Spending discretionary income can spur the economy.
Thus, the amount of discretionary income can be a key economic indicator.
See: Economic
Indicators
Discretionary
Order
An order to buy or sell a security for a customer that lets the broker,
who has limited power of attorney over the customer's account, decide
when to execute the trade and at what price.
See: Discretionary
Account
Discretionary
Trust
Mutual fund or unit trust where the management decides on the best way
to invest the assets. The fund is not limited to a specific kind of security.
See: Mutual
Fund; Unit
Investment Trust
Disinflation
A process that commonly occurs during a recession whereby price increases
slow down--as sales decrease, retailers may not be able to pass on higher
prices to customers.
See: Deflation;
Inflation;
Recession
Disintermediation
The withdrawal of money from low yielding financial accounts, such as
saving accounts, and the reinvestment into higher yielding securities
such as Treasury bills. Banks, in an effort to keep the money, may pay
depositors higher rates. In order to afford the higher rate, banks will
then charge their borrowers higher interest rates. This can possibly lead
to tight money and reduced economic activity.
Disinvestment
Capital investment shrinkage caused by a firm's failure to maintain or
replace capital assets being used up or by the firm's sale of capital
goods such as equipment.
See: Capital
Asset
Disposable
Income
Income that remains after tax payments. This money may be spent on essentials
(e.g., food and shelter), nonessentials (e.g., dining in a restaurant)
or it can be saved.
See: Discretionary
Income
Disproportionate
An arrangement in an oil and gas direct participation program (DPP) whereby
the general partner carries a portion of the program's cost in return
for a larger percentage of the income.
See: Direct
Participation Program
Dissolution
The termination of a business endeavor.
Distributing
Syndicate
Group of brokerage firms or investment bankers that work together to expedite
the distribution of securities in an offering.
See: Distributions
Distribution
Area
Price range in which a security trades for an extended time period. Distribution
areas are a factor in a technical analysts' prediction of when a security
may decline from that price range. To avoid pushing a security's price
below its range, a seller will want to be mindful not to sell below it.
Accumulation of shares in the range aids in the stability of the security's
price.
See: Accumulation
Area
Distributions
1: The payment, to investors, of realized capital gains on securities
within the portfolio of a mutual fund or closed-end investment company.
See: Closed
End Management Company; Mutual
Fund
2: Sale of
a large block of securities over a period to avoid a decline in their
prices. Technical analysts consider distribution patterns to predict when
the security's price will fall.
See: Accumulation
Area; Distribution Area
District
Business Conduct Committee (DBCC)
National Association of Securities Dealers (NASD) committee that has jurisdiction
in handling complaints against, or violations by NASD members within its
district.
See: National
Association of Securities Dealers
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