Your SlideShare is downloading. ×
V. STOCKS (PART 2) Long and Short Purchases and Sales,
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

V. STOCKS (PART 2) Long and Short Purchases and Sales,

291
views

Published on

Published in: Business, Economy & Finance

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
291
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
6
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. V. STOCKS (PART 2)
  • 2.
    • Long and Short Purchases and Sales, Margin Purchases, and Leverage
    • Stock Purchase Basics
      • Broker – Buys and sells securities for individuals and institutions in return for a commission or a set fee
      • Dealer – Buys and sells securities for themselves and/or their firms
      • Broker – Dealer – SEC licensed to buy and sell securities for both their firms and their clients
      • Traders – Buy and sell securities exclusively for their own portfolios
  • 3.
    • Long and Short Purchases and Sales, Margin Purchases, and Leverage
    • Types of Investors
      • Retail Investors – Can be any size, but generally individuals
      • Mini Institutional – Generally purchase or sell stock in 1,000 to 9,999 share blocks, can be small pension and health funds (corporate), trust funds, etc.
      • Institutional – 10,000 or more shares per transaction, includes financial institutions, large trust funds, and mutual funds ( http:// nystrs.org/main/library/AnnualReport/Investments.pdf )
      • Managed Account – Paid money manager, can be discretionary (can conduct trades without client approval) or non-discretionary (all trades must be approved by the client)
  • 4.
    • Long and Short Purchases and Sales, Margin Purchases, and Leverage
    • Types of Brokerage Firms
      • Full Service – Provide information on investments along with brokerage services – most expensive
      • Discount Brokers – Carry out transactions, but generally offer limited research and services or research and services on a fee basis only
      • Online Brokerage – Trades initiated online, clients may have limited or no contact at all with a broker, and limited or fee based advice - cheapest
      • In all instances, cost of trading = commission (to broker and to firm) + fees (to the firm) + taxes
  • 5.
    • Long and Short Purchases and Sales, Margin Purchases, and Leverage
    • Types of Orders
      • Market Order – Purchase or sale of stock at whatever the current market price is
      • Stop Order – The trade occurs once the stock hits a specified price – once the price is hit, it converts to a market order – stock price at purchase or sale can be higher or lower than stop order price depending upon when execution of the trade occurs
  • 6.
    • Long and Short Purchases and Sales, Margin Purchases, and Leverage
      • Limit Order – Purchase or sale of a security occurs only at the specified price
      • Stop Limit Order – Purchase or sale occurs when the stop price is reached, however, the trade may only be executed at more than the limit price for a sale or less than the limit price for a purchase
      • Good Till Cancelled (GTC) – The order remains open until filled
      • Day Order – Only remains open until the close of business on the day placed
  • 7.
    • Long and Short Purchases and Sales, Margin Purchases, and Leverage
    • Buying on Margin
  • 8.
    • Long and Short Purchases and Sales, Margin Purchases, and Leverage
    • Buying on Margin
      • Leverage – Borrowing money to make an investment – can multiply both gains and losses
      • Types of Margin
        • Initial Margin – Must have at least 50% of the purchase price of the securities in cash or securities to purchase on margin
        • Maintenance Margin – Once purchased, cash and securities must have a market value of at least 25% (by regulation) or 30% (per most brokerage firms) of the total value of the account
  • 9.
    • Long and Short Purchases and Sales, Margin Purchases, and Leverage
      • Margin Call – When the price of securities falls, the customer must either “pay up” additional cash and securities until the 25% (30%) minimum is met
  • 10.
    • Long and Short Purchases and Sales, Margin Purchases, and Leverage
    • Examples
  • 11.
    • Long and Short Purchases and Sales, Margin Purchases, and Leverage
    • Selling Short – When an investor sells a stock that he or she does not own, anticipating a profit when the stock price falls
      • Covering the Short – Purchasing stock to replace the stock that you did not own but sold
      • Squeeze Play – When a heavily shorted stock rises in price, forcing a high volume of purchasers to cover their open short sale positions
  • 12.
    • Long and Short Purchases and Sales, Margin Purchases, and Leverage
      • Short Ratio
      • = Number of Shares Sold Short
      • Average Daily Share Transactions
      • An indicator of whether share transactions are purchases, sales, or sales by traders and others who believe that the stock will go down in price.
      • Short as a Percentage of Float
      • = Number of Shares Short
      • Total Number of Shares Outstanding
      • Indicates how much of the total stock available is “tied up” in short sales.
  • 13.
    • Long and Short Purchases and Sales, Margin Purchases, and Leverage
  • 14.
    • Long and Short Purchases and Sales, Margin Purchases, and Leverage
    • Examples