What is the Stock Market Game?


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What is the Stock Market Game?

  1. 1. What is the Stock Market Game?
  2. 2. <ul><li>The Stock Market Game™ (SMG) is an on-line simulation of Wall Street trading that provides a framework for teaching students about the American economic system. </li></ul><ul><li>The SMG is designed specifically for classroom use to help students understand the stock market, the costs and benefits of investing, the sources and uses of capital, profit and loss, and many other related economic concepts. </li></ul>
  3. 3. What Teachers like about SMG <ul><li>generates enthusiasm in hard-to-motivate students </li></ul><ul><li>helps meet educational standards across many required disciplines </li></ul><ul><li>combines the spirit of competition with learning </li></ul><ul><li>promotes cooperation and group autonomy among students </li></ul>
  4. 4. <ul><li>creates interest in current events </li></ul><ul><li>teaches economic concepts </li></ul><ul><li>sharpens skills in mathematics </li></ul><ul><li>incorporates easily into most classes </li></ul><ul><li>Is FUN! </li></ul>What Teachers like about SMG
  5. 5. <ul><ul><li>Started in the late 1970’s by a University of Buffalo professor </li></ul></ul><ul><ul><li>Over 750,000 students compete nationally each year and over 40,000 students in Pennsylvania compete each year </li></ul></ul><ul><ul><li>Nationally sponsored by the Foundation for Investor Education </li></ul></ul>History of the Game
  6. 6. EconomicsPennsylvania is the licensed distributor of the Stock Market Game Program in PA.
  7. 7. Stock Market Game Basics
  8. 8. <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>Each team begins with a hypothetical $100,000. </li></ul><ul><li>Teams may buy , sell , short sell , or short cover their stocks. </li></ul>
  9. 9. <ul><li>Teams should have three to five players. </li></ul><ul><li>Common stocks listed on the American, New York, and NASDAQ Stock Exchanges may be traded. </li></ul><ul><li>Mutual Funds and Bonds may also be traded. </li></ul>
  10. 10. <ul><li>Mutual Funds: </li></ul><ul><ul><li>Closed-ended funds may be traded just like the stocks traded on the NYSE, NASDAQ and American Stock Exchanges. </li></ul></ul><ul><ul><li>Open-ended mutual funds can also be traded but cannot be short sold or short covered . </li></ul></ul>
  11. 11. <ul><li>Bonds: </li></ul><ul><ul><li>8,000 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>
  12. 12. <ul><li>A 2% brokers fee is charged for each transaction </li></ul><ul><li>5% interest is earned on cash balance. </li></ul><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>
  13. 13. <ul><li>The team with the highest portfolio equity at the end of the game wins. </li></ul><ul><li>Portfolios are not liquidated at the end of the game. </li></ul><ul><li>Portfolio equity in the tenth week is used for final rankings. </li></ul>SMG Basics
  14. 14. How Does the Competition Work?
  15. 15. <ul><li>Fall, Spring and Late Spring 10 week games: teams compete within a geographic region and on six levels </li></ul><ul><li>Year long game: teams statewide compete on six levels </li></ul>
  16. 16. <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>SMG Levels
  17. 18. Trading in the Stock Market Game
  18. 19. <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/ login.html </li></ul><ul><li>SMG of PA operates on ‘real time’ trading </li></ul><ul><li>Trades are processed within 15 – 20 minutes </li></ul>
  19. 20. <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><ul><li>Stock and mutual fund ticker symbols are used and can be looked up on the game pages </li></ul>
  20. 21. <ul><li>Bond numbers assigned by the game are looked up on the game pages </li></ul><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>
  21. 22. Sample Bond Number A XXXX . YY NN . N T reasury M unicipal C orporate Seq # T M or C Maturity Year Annual interest rate
  22. 23. <ul><li>Buying stocks and mutual funds: </li></ul><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>
  23. 24. Buying Bonds: <ul><li>Maturity dates no shorter than 5 years </li></ul><ul><li>Trade in “Real Time” </li></ul><ul><li>May not be short sold </li></ul><ul><li>Daily feed of pricing from S&P using previous day’s price’s </li></ul><ul><li>Bonds are priced per $100 of bond principal. </li></ul>A $4,000 bond with a price of $99.50/$100 will cost you: (40 x 99.50 = $3,980) + accrued interest + commission)
  24. 25. <ul><li>Selling assets: </li></ul><ul><li>Must already own the asset (stock, mutual fund or bond) </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><ul><li>For all Bond Sell Transactions the SEC Fee of 5.6 cents per $10,000 trading amount is always added. </li></ul>
  25. 26. Please Note: For real time trading price limits are generally not needed except for trades entered after the market close.
  26. 27. <ul><li>Short Selling: </li></ul><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>General Information
  27. 28. <ul><li>Short Covering: </li></ul><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>General Information
  28. 29. Example: Short Selling and Covering <ul><ul><li>I am borrowing the stock from the broker (2% brokerage fee) and selling it. Now I’ve got cash. </li></ul></ul>I feel that IBM stock is going to go down and want to short sell the stock.
  29. 30. <ul><ul><li>When stock price is at its lowest, I short cover by buying the stock back in the stock exchange at the low price and returning it to the broker (2% brokerage fee). I keep what I didn’t spend. </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>Example: Short Selling and Covering 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.
  30. 31. Long Positions: A Long Position is an asset you own. Stocks: = Value of Long Stocks # of shares X current price per share
  31. 32. Uses the previous day's closing price. Note: Nearly all funds compute their NAVs (Net Asset Value or price per share) once a day at the end of the day based on the value of the securities in their portfolios. Mutual Funds: = Value of Mutual Funds Long Position # of shares X current price per share
  32. 33. Per $100 of bond principal Bonds: = Value of Bonds Long Position $ value X price per $100
  33. 34. Short Positions: A Short Position is a stock you borrowed from the broker and sold # of shares X current price per share = Value of Short Position
  34. 35. 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>= Equity
  35. 36. <ul><li>Buying on Margin: </li></ul><ul><li>You may borrow funds using the stock in your portfolio as collateral for the loan </li></ul><ul><li>Interest charged at 7% </li></ul><ul><li>Initial margin requirement is subtracted from equity </li></ul><ul><li>Remainder is matched dollar for dollar for total buying power </li></ul>
  36. 37. Formula for Initial Margin Requirement <ul><ul><li>50% of Stocks (long & short position) & 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>
  37. 38. $ What’s the cost to play the game?
  38. 39. Team Fees: 10 Week Games: Grades 4-12 $15 College $15 Youth Groups $18 Adult $25 Team Fees: Year Long Game: All groups $25 SMG Costs
  39. 40. <ul><li>Teacher Resource Packet available for purchase ($40): </li></ul><ul><li>Beyond the Market </li></ul><ul><li>Your Guide to Understanding Investing </li></ul><ul><li>Market Mechanics CD Rom </li></ul><ul><li>Classroom materials </li></ul><ul><li>Send check to SMGofPA </li></ul><ul><li>123 Market Street </li></ul><ul><li>Selinsgrove PA 17870 </li></ul><ul><li>(Note SMG Teacher Packet on check) </li></ul>
  40. 41. 1-800-722-6708 [email_address]