Download - Investing in Equities, Futures, and Options
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Have you ever asked to receive your allowance early or asked to be paid early?
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This is referred to as futures market- a contract is issued and payment is rendered for some future activity.
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EquitiesStocks that represent ownership shares in
corporations
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Efficient Market HypothesisUsed to explain the pricing of equitiesStocks are always priced about right, and
bargains are hard to find
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Portfolio DiversificationHolding a number of stock, so that increases
in some could offset unexpected declines in others
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Stock BrokerA person who buys
or sells stockFrom other brokersAt a stock exchangeSupplies inventory
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Organized Stock ExchangesThe New York Stock
ExchangeOldestLargestMost prestigiousLocated on Wall
StreetLists about 3,000
companiesHas about 1,400
seats, or memberships Members pay over
1,00,000 for each seat
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The American Stock ExchangeAMEXHas about 1,000
stocks2nd largest, behind
NYSE4th largest stock
exchange in the country
Companies tend to be smaller than NYSE companies
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Regional Stock ExchangesChicago,
Philadelphia, Pacific, etc.
Also in citiesSmaller stocks, but
today many stocks are dual and can be found on both NYSE and the RSE
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Global Stock ExchangesDevelopments in
computer and electronic trading have linked this markets
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Over-the-Counter MarketElectronic marketplace for securities not
listed or traded on an organized stock exchangeMajority of stocks sold this wayNational Market System (NMS)
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Measures of Stock PerformanceDow-Jones Industrial
AverageMost popular and
widely usedDIJA focuses on
percentage change
Standard and Poor’s 500Uses the price
change of 500 representative stocks as an indicator
Uses index number (sum of 500 companies too high!)
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Trading in the FutureSpot Market:
transaction made immediately at prevailing price
Future Markets: Buyer pays money today, and sellers delivers the commodity in the futureGrain and livestock in
the Midwest Ex. Chicago Board of
Trade
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Trading in the Future, con.Options- contracts
that give investors the option to sell commodities in the future at a price decided on today
Call option- the right to BUY a share of stock at a specified price in the future
Put option- right to sell stock at a specified price in the future