How to Play The Stock Market Game
Stock Market IQ Quiz
<ul><li>Stocks are items found in the storeroom of a grocery store. </li></ul><ul><li>Only rich people invest in the stock...
<ul><li>Any stock that goes up in price must eventually come back down. </li></ul><ul><li>Bears, Bulls, and Pigs are found...
<ul><li>Sometimes companies buy their own stocks on the stock market. </li></ul><ul><li>It is hard to buy a good stock tod...
<ul><li>“ Insider” stock trading means that trading stocks takes place inside a building. </li></ul><ul><li>People can buy...
Investment Basics
The  RISKIER  the Investment  The  HIGHER  the Return Investment Basics: Risk/Return
<ul><li>Insured Savings Accounts </li></ul><ul><li>Savings Bonds </li></ul><ul><li>Certificates of Deposit </li></ul><ul><...
<ul><li>Stocks: </li></ul><ul><li>You own a piece of the company. </li></ul><ul><li>You make money if the company does wel...
Mutual Funds: A mutual fund is a collection of stocks, bonds and other securities owned by a group of investors and manage...
<ul><li>Large : </li></ul><ul><li>Often have high prices </li></ul><ul><li>Low risk of failure </li></ul><ul><li>Usually p...
<ul><li>Common Stocks: </li></ul><ul><li>Pay dividends based on performance of the company </li></ul><ul><li>Have higher r...
<ul><li>Preferred Stocks: </li></ul><ul><li>Dividend amount is preset </li></ul><ul><li>Dividends are  paid on preferred s...
<ul><li>Stock Splits: </li></ul><ul><li>More shares are created at a lower price per share </li></ul><ul><li>Stockholders ...
Investment Basics: Terminology Blue Chips the largest and most  profitable stocks Bull Market a market that is rising Bear...
<ul><li>Price-to-earnings ratio. </li></ul><ul><li>Earnings = earnings per share or firm profit divided by number of share...
Stock Market Game Basics
Stock Market Game Windows <ul><li>Available games:  </li></ul><ul><ul><li>3 ten week periods  </li></ul></ul><ul><ul><ul><...
The Competition: Levels <ul><li>Grades 4-6 </li></ul><ul><li>Grades 7-8 </li></ul><ul><li>Grades 9-12 </li></ul><ul><li>Po...
The Competition: Regions <ul><li>Fall, Spring and Late Spring teams also compete within a geographic region. </li></ul><ul...
Stock Market Game Basics  <ul><li>Teams of students make investment trades to manage portfolios throughout the game. </li>...
Stock Market Game Basics  <ul><li>Teams may  buy ,  sell ,  short sell ,  or   short cover  their stocks and some mutual f...
Stock Market Game Basics  <ul><li>Common stocks listed on the American, New York, and NASDAQ Stock Exchanges may be traded...
Stock Market Game Basics  <ul><li>Stocks and mutual funds valued at less than $5.00 per share may not be bought. </li></ul...
Trading in the SMG <ul><li>Advisors need a working Email address   and Internet access to play </li></ul><ul><li>Transacti...
Trading in the SMG <ul><li>Trades are processed within 15 – 20 minutes </li></ul><ul><li>Stock and mutual fund dividends, ...
Trading in the SMG <ul><li>Stock and mutual fund ticker symbols are used and can be looked up on the game pages </li></ul>...
Trading in the SMG <ul><ul><li>8,000  Bonds  available: </li></ul></ul><ul><ul><li>Corporate </li></ul></ul><ul><ul><li>Mu...
Trading in the SMG <ul><li>Trades entered after 4:00 p.m. will be processed at 9:35 a.m. the following day.   </li></ul><u...
Buying: Stock and Mutual Funds <ul><li>Must be for a minimum of 100 shares </li></ul><ul><li>Must have a price of at least...
Selling: Stocks and Mutual Funds <ul><li>Must already own the asset  </li></ul><ul><li>Stock and mutual fund sell orders f...
Buying and Selling: Bonds <ul><li>Maturity dates no shorter than 5 years </li></ul><ul><li>May not be short sold </li></ul...
Buying and Selling: Bonds <ul><li>Bonds are priced per $100 of bond principal.  </li></ul>Cost of $4,000 bond with a price...
Short Selling <ul><li>Short selling starts with borrowing a stock from your broker </li></ul><ul><li>You sell the borrowed...
Short Covering <ul><li>Must have already short sold the stock </li></ul><ul><li>May set a maximum price limit </li></ul><u...
Example: Short Selling and Covering <ul><ul><li>I borrow the stock from the broker (2%  brokerage fee)  </li></ul></ul><ul...
Example: Short Selling and Covering <ul><ul><li>I return the stock to the broker (2% brokerage fee).  </li></ul></ul><ul><...
Portfolio Value: Long Position <ul><li>A long position is an asset you own. </li></ul>Stocks: =  Value of Long Stocks #  o...
Portfolio Value: Long Position <ul><li>*Net Asset Value is computed once a day at the end of the day based on the value of...
Portfolio Value: Long Position <ul><li>Per $100 of bond face value </li></ul>Bonds: =  Value of Bonds Long Position $  val...
Portfolio Value: Short Position <ul><li>Appears as a minus (-) to indicate a debt </li></ul><ul><li>Held short sell positi...
Portfolio Value: Equity =  Total Equity <ul><li>Total Value of Long Position </li></ul><ul><li>Stocks </li></ul><ul><li>Mu...
Additional Information: Interest <ul><li>Credited weekly on positive cash balances at an annual rate of 2% </li></ul><ul><...
Additional Information: Borrowing <ul><li>Teams may borrow funds to buy stock – called ‘ buying on margin ’ </li></ul><ul>...
<ul><ul><li>50% of Stocks & Mutual Funds </li></ul></ul><ul><ul><li>40% of Treasury Bonds </li></ul></ul><ul><ul><li>10% o...
Playing the  Stock Market Game
Login into  SMG WORLDWIDE Playing SMG: Access Your Portfolio www.smgww.org
Playing SMG: Logging In Sample Login ID PA_3_ZZ245 Use underscores Sample Password FHJT3356 All case sensitive
Playing SMG: Portfolio Start Page The blue Trading tab contains all the functions necessary to compile research and make t...
Playing SMG: Making a Trade Select your choice of investment
Playing SMG: Buying Stock Use the ‘Validate Ticker’ option to ensure you are buying the correct stock.
Playing SMG: Buying Mutual Funds
Playing SMG: Buying Bonds Face (par) value of bond Find lists of bonds.
Playing SMG: Buying Bonds Click on Bond Number for all info
Portfolio Pages: Account Summary
Portfolio Pages : Account Holdings
Portfolio Pages : Transaction Notes
Portfolio Pages : Gains and Losses
Portfolio Pages: Transaction History Actual price
<ul><ul><li>NASDAQ-  www.nasdaq.com </li></ul></ul><ul><ul><li>NYSE-  www.nyse.com </li></ul></ul><ul><ul><li>CNNfn-  www....
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  1. 1. How to Play The Stock Market Game
  2. 2. Stock Market IQ Quiz
  3. 3. <ul><li>Stocks are items found in the storeroom of a grocery store. </li></ul><ul><li>Only rich people invest in the stock market. </li></ul><ul><li>Most stocks on the stock market are sold by the United States Government. </li></ul><ul><li>If the stock market goes up 30 percent one year, it will fall by 30 percent in the next year. </li></ul>Investment Basics: True or False
  4. 4. <ul><li>Any stock that goes up in price must eventually come back down. </li></ul><ul><li>Bears, Bulls, and Pigs are found in the stock market. </li></ul><ul><li>Stock prices are set by the Securities and Exchange Commission, a regulatory agency of the U.S. government. </li></ul><ul><li>Stock markets are open on business days around the clock, around the world. </li></ul>Investment Basics: True or False
  5. 5. <ul><li>Sometimes companies buy their own stocks on the stock market. </li></ul><ul><li>It is hard to buy a good stock today because all the good ones have already been purchased. </li></ul><ul><li>Buying stocks is a sure way to make money. </li></ul><ul><li>Corporations sell new issues of stock on the New York Stock Exchange. </li></ul>Investment Basics: True or False
  6. 6. <ul><li>“ Insider” stock trading means that trading stocks takes place inside a building. </li></ul><ul><li>People can buy stocks on the internet. </li></ul><ul><li>When the stock market goes up, it causes the economy to grow. </li></ul><ul><li>From Learning from the Market , © National Council on Economic Education, New York, NY </li></ul>Investment Basics: True or False
  7. 7. Investment Basics
  8. 8. The RISKIER the Investment The HIGHER the Return Investment Basics: Risk/Return
  9. 9. <ul><li>Insured Savings Accounts </li></ul><ul><li>Savings Bonds </li></ul><ul><li>Certificates of Deposit </li></ul><ul><li>Treasury Bonds </li></ul><ul><li>Corporate Bonds </li></ul><ul><li>Mutual Funds </li></ul><ul><li>Stocks </li></ul><ul><li>Collectibles </li></ul><ul><li>Commodities </li></ul>Investment Basics: Types
  10. 10. <ul><li>Stocks: </li></ul><ul><li>You own a piece of the company. </li></ul><ul><li>You make money if the company does well. </li></ul><ul><li>Bonds: </li></ul><ul><li>You loan money to a corporation or government. </li></ul><ul><li>You earn the interest. </li></ul>Investment Basics: Choices in SMG
  11. 11. Mutual Funds: A mutual fund is a collection of stocks, bonds and other securities owned by a group of investors and managed by a professional investment advisory firm. You own one portion of the collection. Investment Basics: Choices in SMG
  12. 12. <ul><li>Large : </li></ul><ul><li>Often have high prices </li></ul><ul><li>Low risk of failure </li></ul><ul><li>Usually pay regular dividends </li></ul><ul><li>Small : </li></ul><ul><li>Potential for growth is greater than for larger companies </li></ul><ul><li>Generally prices are lower </li></ul>Investment Basics: Company Size
  13. 13. <ul><li>Common Stocks: </li></ul><ul><li>Pay dividends based on performance of the company </li></ul><ul><li>Have higher risk but may have higher reward </li></ul><ul><li>Listed on New York Stock Exchange, Amex and Nasdaq Exchanges </li></ul>Investment Basics: Types of Stocks
  14. 14. <ul><li>Preferred Stocks: </li></ul><ul><li>Dividend amount is preset </li></ul><ul><li>Dividends are paid on preferred stocks before common stocks </li></ul><ul><li>Have lower risk but may limit reward </li></ul><ul><li>Identified as pf in listings </li></ul>Investment Basics: Types of Stocks
  15. 15. <ul><li>Stock Splits: </li></ul><ul><li>More shares are created at a lower price per share </li></ul><ul><li>Stockholders profit if stocks go up </li></ul><ul><li>Indicated with an (s) in the paper </li></ul><ul><li>Ex : Dell $109  $54 </li></ul>Investment Basics: Stock Splits
  16. 16. Investment Basics: Terminology Blue Chips the largest and most profitable stocks Bull Market a market that is rising Bear Market a market that is falling
  17. 17. <ul><li>Price-to-earnings ratio. </li></ul><ul><li>Earnings = earnings per share or firm profit divided by number of shares. </li></ul><ul><li>Generally, more earnings per share given stock price results in a lower P/E ratio and a better buy. </li></ul><ul><li>P/E ratios vary by industry and should be compared to other like companies. </li></ul>Investment Basics: P/E Ratio
  18. 18. Stock Market Game Basics
  19. 19. Stock Market Game Windows <ul><li>Available games: </li></ul><ul><ul><li>3 ten week periods </li></ul></ul><ul><ul><ul><li>Fall - October – December </li></ul></ul></ul><ul><ul><ul><li>Spring – February - April </li></ul></ul></ul><ul><ul><ul><li>Late Spring – Mid March - May </li></ul></ul></ul><ul><ul><li>One year long game </li></ul></ul><ul><li>Current game dates: www.economicspa.org </li></ul>
  20. 20. The Competition: Levels <ul><li>Grades 4-6 </li></ul><ul><li>Grades 7-8 </li></ul><ul><li>Grades 9-12 </li></ul><ul><li>Post-Secondary </li></ul><ul><li>Youth Groups </li></ul><ul><li>Adult </li></ul>
  21. 21. The Competition: Regions <ul><li>Fall, Spring and Late Spring teams also compete within a geographic region. </li></ul><ul><li>Regions are identified by EconomicsPennsylvania Centers for Economic Education service areas. </li></ul><ul><li>EconomicsPennsylvania Regional Map </li></ul><ul><li>Note: year long game levels are statewide . </li></ul>
  22. 22. Stock Market Game Basics <ul><li>Teams of students make investment trades to manage portfolios throughout the game. </li></ul><ul><li>3-5 players per team recommended. </li></ul><ul><li>Each team begins with a hypothetical $100,000. </li></ul><ul><li>Stocks, bonds and mutual funds are available for trading. </li></ul>
  23. 23. Stock Market Game Basics <ul><li>Teams may buy , sell , short sell , or short cover their stocks and some mutual funds. </li></ul><ul><li>A 2% brokers fee is charged for each transaction </li></ul><ul><li>2% interest is earned on cash balance. </li></ul>
  24. 24. Stock Market Game Basics <ul><li>Common stocks listed on the American, New York, and NASDAQ Stock Exchanges may be traded. </li></ul><ul><li>Closed-ended mutual funds may be traded just like stocks traded on the three exchanges. </li></ul><ul><ul><li>Open-ended mutual funds can also be traded but cannot be short sold or short covered. </li></ul></ul>
  25. 25. Stock Market Game Basics <ul><li>Stocks and mutual funds valued at less than $5.00 per share may not be bought. </li></ul><ul><li>Teams may borrow up to $100,000 to purchase stocks on margin – 7% interest is charged </li></ul><ul><li>The team with the highest portfolio equity at the end of the game wins. Portfolios are not liquidated at the end of the game. </li></ul>
  26. 26. Trading in the SMG <ul><li>Advisors need a working Email address and Internet access to play </li></ul><ul><li>Transactions are made at the SMG WorldWide site at: www.smgww.org or http://stockmarketgame.org/ </li></ul><ul><li>SMG of PA operates on ‘real time’ trading </li></ul>
  27. 27. Trading in the SMG <ul><li>Trades are processed within 15 – 20 minutes </li></ul><ul><li>Stock and mutual fund dividends, stock splits, and bond interest payments are automatically computed into team portfolios </li></ul><ul><li>Portfolios are updated overnight and available on a daily basis </li></ul><ul><li>Rankings are updated every weekend </li></ul>
  28. 28. Trading in the SMG <ul><li>Stock and mutual fund ticker symbols are used and can be looked up on the game pages </li></ul><ul><li>Bond numbers assigned by the game are looked up on the game pages </li></ul>
  29. 29. Trading in the SMG <ul><ul><li>8,000 Bonds available: </li></ul></ul><ul><ul><li>Corporate </li></ul></ul><ul><ul><li>Municipal (state only) </li></ul></ul><ul><ul><li>Treasury </li></ul></ul>A XXXX . YY NN . N Seq # T M or C Maturity Year Annual interest rate
  30. 30. Trading in the SMG <ul><li>Trades entered after 4:00 p.m. will be processed at 9:35 a.m. the following day. </li></ul><ul><li>Rogue Stock Rule: If a stock has not been traded for seven days it will not be accepted and will not be permitted to be traded even though it is on the three major stock exchanges. </li></ul>
  31. 31. Buying: Stock and Mutual Funds <ul><li>Must be for a minimum of 100 shares </li></ul><ul><li>Must have a price of at least $5.00 per share </li></ul><ul><li>May set a maximum purchase price limit for stocks </li></ul>
  32. 32. Selling: Stocks and Mutual Funds <ul><li>Must already own the asset </li></ul><ul><li>Stock and mutual fund sell orders for less than 100 are permitted. </li></ul><ul><li>May set a minimum selling price limit for stocks </li></ul>Please Note: For real time trading price limits are generally not needed except for trades entered after the market close.
  33. 33. Buying and Selling: Bonds <ul><li>Maturity dates no shorter than 5 years </li></ul><ul><li>May not be short sold </li></ul><ul><li>Daily feed of pricing from S&P using previous day’s prices </li></ul>
  34. 34. Buying and Selling: Bonds <ul><li>Bonds are priced per $100 of bond principal. </li></ul>Cost of $4,000 bond with a price of $99.50: 4000/100 = 40 40 x 99.50 = $3,980 + accrued interest + commission For all Bond Sell Transactions the SEC Fee of 5.6 cents per $10,000 trading amount is always added.
  35. 35. Short Selling <ul><li>Short selling starts with borrowing a stock from your broker </li></ul><ul><li>You sell the borrowed stock hoping to buy it back at a lower price and return (short cover) it to your broker for a profit </li></ul><ul><li>All rules for buying still apply </li></ul>
  36. 36. Short Covering <ul><li>Must have already short sold the stock </li></ul><ul><li>May set a maximum price limit </li></ul><ul><li>All other rules for selling apply </li></ul>
  37. 37. Example: Short Selling and Covering <ul><ul><li>I borrow the stock from the broker (2% brokerage fee) </li></ul></ul><ul><ul><li>I sell it. Now I’ve got cash. </li></ul></ul><ul><ul><li>I short cover by buying the stock back in the stock exchange at a lower price </li></ul></ul>I feel that IBM stock is going to go down and want to short sell the stock.
  38. 38. Example: Short Selling and Covering <ul><ul><li>I return the stock to the broker (2% brokerage fee). </li></ul></ul><ul><ul><li>I get the difference between the high price and the low price minus the brokerage fees. </li></ul></ul>Note: it’s important to remember that you borrow the stock from a broker and return the stock. You do not give the broker any money (except for brokerage fee).
  39. 39. Portfolio Value: Long Position <ul><li>A long position is an asset you own. </li></ul>Stocks: = Value of Long Stocks # of shares x current price per share
  40. 40. Portfolio Value: Long Position <ul><li>*Net Asset Value is computed once a day at the end of the day based on the value of the securities in their portfolios. </li></ul>Mutual Funds: = Value of Mutual Funds Long Position # of shares x current price per share (NAV)*
  41. 41. Portfolio Value: Long Position <ul><li>Per $100 of bond face value </li></ul>Bonds: = Value of Bonds Long Position $ value/100 x price per $100
  42. 42. Portfolio Value: Short Position <ul><li>Appears as a minus (-) to indicate a debt </li></ul><ul><li>Held short sell positions are marked to the market daily and the resulting gain or loss is added or subtracted from cash. </li></ul>A short position is an asset you owe. # of shares stock/closed mutual fund x current price per share = Value of Short Position
  43. 43. Portfolio Value: Equity = Total Equity <ul><li>Total Value of Long Position </li></ul><ul><li>Stocks </li></ul><ul><li>Mutual Funds </li></ul><ul><li>Treasury/Municipal/Corporate Bonds </li></ul><ul><li>+ Cash Balance </li></ul>
  44. 44. Additional Information: Interest <ul><li>Credited weekly on positive cash balances at an annual rate of 2% </li></ul><ul><li>Charged weekly on negative cash balances at an annual rate of 7% </li></ul><ul><li>Interest is calculated daily, summed for the week (Saturday through Friday) and posted on the following Tuesday. </li></ul><ul><li>Daily rate is based upon a 365 day year. </li></ul>
  45. 45. Additional Information: Borrowing <ul><li>Teams may borrow funds to buy stock – called ‘ buying on margin ’ </li></ul><ul><li>Uses ½ the holdings in the portfolio as collateral for the loan </li></ul><ul><li>Initial margin requirement (50% of Long Position) is subtracted from equity </li></ul><ul><li>Remainder is matched dollar for dollar for total buying power </li></ul>
  46. 46. <ul><ul><li>50% of Stocks & Mutual Funds </li></ul></ul><ul><ul><li>40% of Treasury Bonds </li></ul></ul><ul><ul><li>10% of Municipal Bonds </li></ul></ul><ul><ul><li>25% of Corporate Bonds </li></ul></ul>Additional Information: Borrowing Formula for Initial Margin Requirement
  47. 47. Playing the Stock Market Game
  48. 48. Login into SMG WORLDWIDE Playing SMG: Access Your Portfolio www.smgww.org
  49. 49. Playing SMG: Logging In Sample Login ID PA_3_ZZ245 Use underscores Sample Password FHJT3356 All case sensitive
  50. 50. Playing SMG: Portfolio Start Page The blue Trading tab contains all the functions necessary to compile research and make trades.
  51. 51. Playing SMG: Making a Trade Select your choice of investment
  52. 52. Playing SMG: Buying Stock Use the ‘Validate Ticker’ option to ensure you are buying the correct stock.
  53. 53. Playing SMG: Buying Mutual Funds
  54. 54. Playing SMG: Buying Bonds Face (par) value of bond Find lists of bonds.
  55. 55. Playing SMG: Buying Bonds Click on Bond Number for all info
  56. 56. Portfolio Pages: Account Summary
  57. 57. Portfolio Pages : Account Holdings
  58. 58. Portfolio Pages : Transaction Notes
  59. 59. Portfolio Pages : Gains and Losses
  60. 60. Portfolio Pages: Transaction History Actual price
  61. 61. <ul><ul><li>NASDAQ- www.nasdaq.com </li></ul></ul><ul><ul><li>NYSE- www.nyse.com </li></ul></ul><ul><ul><li>CNNfn- www.cnnfn.com </li></ul></ul><ul><ul><li>CNBC- www.cnbc.com </li></ul></ul><ul><ul><li>EDGAR Database of Corporate Information- www.sec.gov/edgarhp.htm </li></ul></ul><ul><ul><li>Yahoo! Finance- http://finance.yahoo.com </li></ul></ul>Playing SMG: Useful links
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