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

2. 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.

3. 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

4. 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

5. 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

6. 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

7. 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