Investing in Equities, Futures & Options Pgs. 328 - 333 Chapter 12.3 Investing in Equities, Futures & Options Pgs. 328 - 333

Market Efficiency Equities – stocks that represent ownership Price is determined by supply & demand Supply is simply the # the company has made available Demand is affected by numerous variables Efficient Market Hypothesis – with so many people watching stocks must be valued just about right.

Cont. So how am I supposed to get rich? How do I buy them? Portfolio diversification Some will go up Some will go down By spreading your investments you can offset risk How do I buy them? Online stockbroker

Organized Stock Exchanges The New York Stock Exchange This one is “Wall Street” Lists over 3000 stocks Only the biggest & best get on this exchange The American Stock Exchange Smaller more speculative stocks Regional Exchanges Chicago, Boston, Philadelphia & more Easier for locals to interact with the market Global Stock Exchanges Most Countries have one & they are now linked

The Over the Counter Market Electronic exchange for those that aren’t on an organized exchange The NASDAQ for example Most stocks in the country are on the OCM New companies, no dividends The internet has made this all much easier

Measures of Stock Performance The Dow Jones Industrial Average Measures 30 different stocks on the NYSE Uses “points” This was equal to $1 – not anymore Standard & Poor’s 500 500 stocks on different exchanges Reports an index number Bull vs. Bear Markets Bull – stock prices move steadily up Bear – stock prices move steadily down

Trading in the Future Spot & Future Markets Options Markets Spot – right here & now, on the spot Futures contract – buy or sell later at a preset price Agriculture Futures market – futures contracts are bought & sold Options Markets Options - right to buy or sell later at a price set today Call option – pay to buy it later at a set price Put option – pay to sell it later at a set price Option market – options are traded