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Buying & Selling Stocks Mrs. Wilson: Career & Financial Management Buying & Selling Stocks Mrs. Wilson: Career & Financial Management

The Securities Market • Consists of channels through which you can buy an sell 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 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 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 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 NASDAQ • This is the electronic quotation system for brokers operating in the OTC market • Acronym National Association of Securities Dealers Automated Quotation System • To be listed with NASDAQ, companies must have issued at least 100, 000 shares of stock worth $1 M.

Bull & Bear Markets • Bull Market – Prolonged period of rising stock prices 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 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 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 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 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 – Assignment • Work in class together to complete page 121 in your workbook – Activity 12. 3 Buying on Margin – Activity 12. 4 Selling Short