What is a Lame Duck?

Lame duck is an out-of-use term used with reference to a trader who has defaulted on a debt or gone bankrupt due to an inability to cover trading losses. The phrase can be traced to the early years of commodity trading and development of the London Stock Exchange during the mid-1700s. How the term first became used by stock traders is a matter of speculation. It was first used among traders who operated from coffee houses before the Exchange found a formal home, and is recorded in newspapers and bank records in the 1760s.

Key Takeaways

  • Lame duck was a term used to reference traders who had become bankrupt or were ineffective at trading.
  • It was first used by traders who operated from coffee houses before the Exchange found a formal home.

Understanding Lame Duck

It is thought that traders who had injured themselves financially in the market waddled away from the exchange. The terms bull and bear date from the same period. Eventually, "lame duck" found its way to the United States where it first became a descriptor of an underfinanced business scheme. It has also described a politician who is ineffective, has chosen not to seek re-election, is ineligible to run for office again or has lost an election but is still in office until the election winner takes control of the office.