Dedicated Short Bias
The short biased managers invest mostly in short positions in equities and equity derivative products. To be classified as a short biased manager, the short bias of the manager's portfolio must be constantly greater than zero. To effect the short sale, the manager borrows the stock from a counter party (often its prime broker) and sells it in the market. The proceeds from the sale are kept by the broker as collateral. An additional margin of typically 5% to 50% must be deposited in the form of liquid securities. The margin is adjusted daily. Leverage is created because margin is below 100%. Short selling can be time consuming and expensive. The manager needs very efficient stock borrowing and lending facilities. Because of this, short positions are sometimes implemented by selling forward; selling stock index futures or buying put options and put warrants on single stocks or stock indices.

Deliverable Grades
The standard grades of commodities or instruments listed in the rules of the exchanges that must be met when delivering cash commodities against futures contracts. Grades are often accompanied by a schedule of discounts and premiums allowable for delivery of commodities of lesser or greater quality than the standard called for by the exchange. Also referred to as contract grades.

Deliverable Stocks
Stocks of commodities located in exchange approved storage, for which receipts may be used in making delivery on futures contracts. In the cotton trade, the term refers to cotton certified for delivery.

Delivery Day
The third day in the delivery process at the Chicago Board of Trade , when the buyer's clearing firm presents the delivery notice with a certified check for the amount due at the office of the seller's clearing firm.

Delivery Month
A specific month in which delivery may take place under the terms of a futures contract. Also referred to as contract month.

Delivery, Nearby
The nearest traded month. In plural form, one of the nearer trading months.

Delivery
The transfer of the cash commodity from the seller of a futures contract. Each futures exchange has specific procedures for delivery of a cash commodity. Some futures contracts, such as stock index contracts, are cash settled.

Delta Margining
An option margining system used by some exchange members and/or floor traders which equates the changes in option premiums with the changes in the price of the underlying futures contract to determine risk factors on which to base the margin requirements.

Delta
A measure of how much an option premium charges, given a unit change in the underlying futures price. Delta of ten is interpreted as the probability that the option will be in-the-money by expiration.

Derivative
An instrument whose value, usefulness, and marketability is dependent upon or derives from an underlying asset. Classes of derivatives include futures contracts, options, currency forward contracts, swaps, and options on futures.

Derivative Based Strategies
These are funds that invest in markets typically dominated by derivative instruments. For example, commodity funds typically invest in futures contracts and currency funds typically invest in forward contracts and swap agreements.

Diagonal Spread
A spread between two call options or two put options with different strike prices and different expiration dates.

Differentials
Price differences between classes, grades and delivery locations of various stocks of the same commodity.

Distressed Securities
Buys equity, debt, or trade claims at deep discounts of companies in or facing bankruptcy or reorganization. Profits from the market's lack of understanding of the true value of the deeply discounted securities and because the majority of investors cannot own below investment grade securities.

The strategy involves investing in the illiquid debt or equity of firms in or near bankruptcy to profit from potential recovery. Portfolios are generally unlevered. Equity risk may be hedged by shorting the stock or using index derivatives.

Distribution Policy
The term "distribution" related to how both the general and limited partners receive profits as the investments are liquidated.

Double Hedging
As used by the CFTC, it implies a situation where a trader holds a long position in the futures market in excess of the speculative limit as an offset to a fixed price sale even though the trader has an ample supply of the commodity on hand to fill all sales commitments.

Downside Deviation
Similar to the loss standard deviation except the downside deviation considers only the returns that fall below a defined Minimum Acceptable Return (MAR) rather than the arithmetic mean. For example, if the MAR is assumed to be 10 %, the downside deviation would measure the variation of each period that falls below 10 %.

Downside Risk
The measurement of the variability of returns below a minimum acceptable return specified by the investor. Downside risk is an alternative measurement that challenges standard deviation - the most widely accepted calculation of risk. Unlike standard deviation, downside risk calculations do not include returns above the minimum acceptable return target, because they pose no threat to the investor's ability to meet their investment objectives.

Drawdown
A drawdown is any losing period during an investment time frame. It is calculated by taking the peak to valley loss relative to the peak for a stated time period. The figure is expressed as a percentage. For example, fund ABC had a return of 10% in March and a return of - 5% in July. The drawdown for this period (March to July) would be 15%.

Dual Trading
Dual trading occurs when (1) a floor broker executes customer orders and, on the same day, trades for his own account or an account in which he has an interest; or (2) a Futures Commission Merchant carries customer accounts and also trades, or permits its employees to trade, in accounts in which it has a proprietary interest, also on the same day.