Options Glossary

Day order: A type of option order that instructs the broker to cancel any unfilled portion of the order at the close of trading on the day the order was first entered.
Day trade: A position (stock or option) that is opened and closed on the same day.
Debit: Money paid out from an account from either a withdrawal or a transaction that results in decreasing the cash balance.
Debit spread: A spread strategy that decreases the account's cash balance when established. A bull spread with calls and a bear spread with puts are examples of debit spreads.
Decay: A term used to describe how the theoretical value of an option erodes or declines with the passage of time. Time decay is specifically quantified by Theta.
Delivery: The process of meeting the terms of a written option contract when notification of assignment has been received. In the case of a short equity call, the writer must deliver stock and in return receives cash for the stock sold. In the case of a short equity put, the writer pays cash and in return receives the stock.
Delta: A measure of the rate of change in an option's theoretical value for a one-unit change in the price of the underlying stock. Delta is a first-order option Greek.
Derivative / Derivative security: A financial security whose value is determined in part from the value and characteristics of another security known as the underlying security.
Diagonal spread: A strategy involving the simultaneous purchase and writing of two options of the same type that have different strike prices and different expiration dates. Example: buying 1 May 60 call and writing 1 March 65 call.
Discount: An adjective used to describe an option that is trading at a price less than its intrinsic value (i.e., trading below parity).
Discretion: Freedom given by an investor to his or her account executive to use judgment regarding the execution of an order. Discretion can be limited, as in the case of a limit order that gives the floor broker price flexibility beyond the stated limit price to use his or her judgment in executing the order. Discretion can also be unlimited, as in the case of a market-not-held order.