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Learn about career and financial management in the securities market, including buying and selling stocks, bonds, and trading agents. Explore the NY Stock Exchange, OTC market, NASDAQ, and investing strategies like short-term techniques and short selling.
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Buying & Selling Stocks Mrs. Wilson: Career & Financial Management
The 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 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 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) • 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
NASDAQ • 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. National Association of Securities Dealers Automated Quotation System
Bull & 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 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 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 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 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
Assignment • Work in class together to complete page 121 in your workbook • Activity 12.3 Buying on Margin • Activity 12.4 Selling Short
