Chapter 11 Section 3

Share: portion of stock Equities: claims of ownership in a corporation

capital gain: the difference between a higher selling price and a lower purchase price, resulting in a financial gain for the seller.

capital loss: the difference between a lower selling price and a higher purchase price resulting in a financial loss to the seller

stock split: the division of a single share of stock into more than one share

stockbroker: a person who links buyers and sellers of stock

brokerage firm: a business that specializes in trading stocks stock exchange: a market for buying and selling stock

NASDAQ-AMEX: market that specializes in American high-tech and energy stocks

OTC market: an electronic marketplace for stock that is not listed or traded on an organized exchange

futures: contracts to buy or sell at a specific date in the future at a price specified today

In the New York stock Exchange, the wrong decision can mean the difference between multi thousands of dollars. Other than bonds, issuing stocks is another way to raise funds in a big corporation.

Stocks are issued in portions known as shares. By selling stock, corporations raise money to start, run, and expand their business. Stocks are claims of parts of an ownership in a corporation

Dividends are what corporate pays out to their stock holders. They pay four times a year. The payment that is made is based on how much profit the business makes. The higher the profit the more you get for your stocks

If something called a stock split happens, people who own stock get more stock, but the extra stock that is gained also causes the stock to be worth less than normal. Those who have stock normally like it when the stock splits because the stock tends to rise in price afterwards.

Stockbrokers help in the trading of stocks. Stockbrokers maintain business by charging a commission fee for every meeting or they sometimes buy stock at a lower price and sell it at a higher price to people. Stockbrokers advise people on whether or not to buy or sell certain stock

Purchasing things such as stock is very risky because the firm could lose money or even gain less profit than normally expected. If this happens then the stock holder will get a smaller dividend or not even get one at all. With this people normally sell their stock and get less money than they bought it for which is called capital loss.

The NYSE or New York Stock Exchange is the countries largest and most powerful exchange The NYSE began in 1792 as an informal, outdoor exchange. Overtime people bought more and the market went up and the exchange went indoor and became restricted to a limited number of members.

The technology today makes the transactions of stock almost instant. The NYSE handles only the stock and bonds of the biggest and most formed businesses in the country. These businesses are on a list and are known as the blue-chip companies. Blue-chip stock are bought the most because they are expected to do so well and to produce more over time.

The AMEX, or the American stock exchange used to be the second largest stock exchange until 1998, then people traded more over the internet. Mergers finally combined the AMEX with the NASDAQ internet technology. They sell riskier stocks from less established and smaller companies

In a future, the buyer would pay a certain price now, and the seller would deliver the good in a certain time from now. Futures are normally only associated with goods such as livestock and grains. These kinds of exchanges are included in the Chicago Board of Trade and The New York Mercantile Exchange markets

The American stock exchange used to be the largest exchange. NASDAQ stands for the National Association of Security Dealers’ Automated Quotation System.

The merger combines AMEX’s large list of firms with NASDAQ’s internet technology NASDAQ-AMEX offers global stock in cooperation with foreign exchange.

Most of the stocks listed on the OTC market are issued by new and growing companies As a result, almost no OTC companies pay dividends.

A buyer and seller might agree today on a price of $4 A buyer and seller might agree today on a price of $4.50 for a bushel of soybeans six or nine months in the future.

The call option gives the right, but not the obligation, to purchase a certain stock at the price of say, $100.

If at the end of 6 months, the price has gone up to $115 per share, you will still be able to buy for the old deal of $100.

Day traders try to predict minute by minute price change. Most people who buy stock hold their investment for a period of time. Day traders try to predict minute by minute price change.

When the stock market rises steadily over a period of time, a bull market exists. In a bull market, investors expect an increase in profit thus, they buy stock

Herbert Hoover took office in 1929 Herbert Hoover took office in 1929. The United States economy was in excellent shape

Despite widespread optimism about continuing prosperity, there were still some signs of trouble.

What are options? They are contracts that give investors the choice to buy or sell stock and other financial assets.

What is a call option? It is the option to buy shares of stock at a specified time in the future.

What is a put option? It is the option to sell shares of stock at specified times in the future.

What is the bull market? It is the steady rise in the stock market over a period of time.

What is a bear market? It is a steady drop in the stock market over a period of time.

What is The Dow? It is the index that shows how certain stocks have traded.

What is the S & P 500? The index that shows the price changes of 500 different stocks.

What was the Great Crash? It was the collapse of the stock market in 1929.

What is a speculation? The practice of making high-risk investments with borrowed money in hopes of getting a big return.

What are two benefits and two risks of buying stock? Benefits: a chance to make a profit, and holding part of a company Risks: company may make less than expected; may lose money