Post on 15-Dec-2015
Buying & Selling Stocks Buying & Selling Stocks Mrs. Wilson: Career & Financial Management
The Securities MarketThe Securities Market
• Consists of channels through which you can buy an sell securities:– Stocks– Bonds
• Trading Agent– You need a trading agent to buy and sell common
and preferred stock
Securities ExchangeSecurities Exchange
• A marketplace where brokers who are representing investors meet to buy and sell securities
• The largest organized exchange in the US is the NY Stock Exchange (NYSE)
• The smaller American Stock Exchange (AMEX) is also in NY City
• Regional exchanges are located throughout the country
NYSE BuildingNYSE Building
• Trading Floor– Where stocks are bought and sold– Two-third the size of a football field– Around the edge are the booths with computer
terminals that are open at both ends • There is room inside each booth for a dozen or more floor
brokers
• Floor Brokers– Buy and sell stocks on the exchange
Over-the-Counter Market (OTC)Over-the-Counter Market (OTC)
• When securities are bought and sold through brokers but not through a stock exchange, the transaction is over-the-counter (OTC)
• It is a network of brokers who buy and sell the securities of corporations that are not listed on the securities exchange
• They do not deal face-to-face
• Trades are completed by telephone and a computerized system displays current price quotations on a terminal in the broker’s office
NASDAQNASDAQ
National Association of Securities Dealers Automated Quotation System
• This is the electronic quotation system for brokers operating in the OTC market
• Acronym
• To be listed with NASDAQ, companies must have issued at least 100,000 shares of stock worth $1 M.
Bull & Bear MarketsBull & Bear Markets
• Bull Market– Prolonged period of rising stock prices and a general feeling of investor
optimism– Confidence about how the country is doing also servers to drive up
stock prices
• Bear Market– Prolonged period of falling stock prices and a general feeling of investor
pessimism– Stock prices may fall 20 percent or more– Bear markets are usually short and savage
• Average Bull Market often lasts three to four times as long as a Bear Market
Investing StrategiesInvesting Strategies
• Speculator/Day Trader– Buying and selling stock within a short period of time.
• Investor– Holding your investment for a long period of time (a year or
more)
Short-Term TechniquesShort-Term Techniques
• What is the goal?– To buy a stock that will soon increase in value
• Buy on Margin– Borrowing money from your broker
• You must deposit a minimum of $2000 in cash or eligible securities (collateral)
Buying on Margin ExampleBuying on Margin Example
• You want to buy 100 shares of XYZ Corporation at $20/share ($2,000)
• You could use $1,000 from your margin account and borrow $1,000, with interest, from your broker
• This strategy is called leverage or the sue of borrowed money to buy securities
• When you sell the stock, you repay the loan with interest
Short SellingShort Selling
• Selling stock borrowed from the broker that must be replaced at a later time
• You borrow a certain number of shared from the broker
• You then sell the borrowed stock, knowing that you must buy it back later and return it to the broker
• You are betting the price will drop, so that you can buy it back at a lower price than you sold it for
AssignmentAssignment
• Work in class together to complete page 121 in your workbook– Activity 12.3 Buying on Margin– Activity 12.4 Selling Short