1. The Stock Market Game Program
A classroom activity for students grades

2. Stock Market
Game Basics

3. SMG Basics
Real-time stock market simulation
Played on the internet from any computer
The game runs for ten weeks in the fall, spring, and late spring. A new whole year game is also available.

4. Transactions are made at the SMG WorldWide site at: www.smgww.org
SMG Rules
Transactions are made at the SMG WorldWide site at:
Trades are processed in 5 – 20 minutes

5. Each team begins with a hypothetical $100,000
SMG Basics
Each team begins with a hypothetical $100,000
Teams should have one to five players

6. SMG Basics
Teams may buy, sell, short sell, or short cover their stocks
Invest in common stocks, mutual funds and ETFs traded on the three major exchanges: American, New York, and NASDAQ Stock Exchanges

7. SMG Basics
A 2% brokers fee is charged for each buy or sell – limits day trading issue
Stocks valued at less than $5.00 per share may not be bought
Teams may borrow up to $100,000 to purchase stocks on margin -- interest is charged

8. Portfolios are updated and available on a daily basis
SMG Rules
Stock and cash dividends and splits are automatically computed into team portfolios
Portfolios are updated and available on a daily basis
Rankings are updated every weekend
Teams will not appear in the rankings until a trade is made

9. 2% annual rate of interest is earned on cash balance
SMG Rules
2% annual rate of interest is earned on cash balance
7% annual rate of interest is paid on negative cash balances (borrowed money)

10. Trades are made based on prices at time of order (market order).
Trades entered after 4:00 p.m. will are made at the next day’s opening price.
You may trade only stocks and mutual funds that have traded within the last 7 days.

11. SMG Basics
Portfolios are not liquidated at the end of the game and should not be liquidated at the end of the game
The team with the highest portfolio equity at the end of the game wins
Portfolio equity in the tenth week is used for final rankings

12. How Does the Competition Work?

13. Teams compete within a geographic region and on six levels

14. Grades 4-6 Grades 7-8 Grades 9-12 Post-Secondary Youth Groups Adult
SMG Levels
Grades 4-6
Grades 7-8
Grades 9-12
Post-Secondary
Youth Groups
Adult

16. General
Information

17. Buying: Ticker symbols are available online
General Information
Buying:
Ticker symbols are available online
Must be for a minimum of 100 shares
May set a maximum purchase price limit
Called a “Long” position

18. Buying: Must have closing price of at least $5.00 per share
General Information
Buying:
Must have closing price of at least $5.00 per share
No “penny” stocks
Most brokers will not allow margin purchases of stocks below $5.00

19. Selling: Must already own the stock
General Information
Selling:
Must already own the stock
Must be for a minimum of 100 shares (unless selling the only remaining shares)
ex: If you bought 120 shares, then sold 100, you may then sell the remaining 20.
May set a minimum selling price limit

20. Setting a “limit” price
A limit order is an order that sets the maximum or minimum at which you are willing to buy or sell a particular stock.
you want to buy stock ABC, which is trading at $12, you can set a limit order for $ This guarantees that you will pay no more than $12.50 to buy this stock.
you own stock ABC and it is trading at $15, you could place a limit order to sell it at $ This guarantees that the stock will be sold at a price greater than or equal to $14.50 but not below.
Best for overnight or weekend trades. The limit trade is executed only once.

21. General Information
Please Note:
For real time trading price limits are generally not needed except for trades entered after the market close.

22. General Information
Short Selling:
Short selling starts with borrowing a stock from your broker
You sell the borrowed stock hoping to buy it back at a lower price and return (short cover) it to your broker for a profit
All rules for buying still apply

23. Short Covering: Must have already short sold the stock
General Information
Short Covering:
Must have already short sold the stock
May set a maximum price limit
All other rules for selling apply

24. Example: Short Selling and Covering
General Information
Example: Short Selling and Covering
I feel that IBM stock is going to go down and want to short sell the stock.
I am borrowing the stock from the broker (2% brokerage fee) and selling it. Now I’ve got cash.

25. Example: Short Selling and Covering
General Information
Example: Short Selling and Covering
When stock price is at its lowest, I short cover by buying the stock back in the stock exchange at the low price and returning it to the broker (2% brokerage fee). I keep what I didn’t spend.
I get the difference between the high price and the low price minus the brokerage fees.

26. A Long Position is a stock you own.
General Information
Long Positions:
A Long Position is a stock you own.
Ex: If a team owns 100 shares of McDonalds, their long position is 100 shares.
= Value of Long Position
# of shares
X current price per share

27. A Short Position is a stock you borrowed from the broker and sold
General Information
Short Positions:
A Short Position is a stock you borrowed from the broker and sold
# of shares
X current price per share
= Value of Short Position

28. = Equity Equity: + Cash Balance
General Information
Equity:
Total Value of Long and Short Positions
+ Cash Balance
= Equity

29. General Information
Buying on Margin:
You may borrow funds using the stock in your portfolio as collateral for the loan
Interest charged at 7%

30. Borrowing on Margin
At the beginning of the game, teams have $200,000 of purchasing power, 50% of which is collateralized by your initial cash portfolio of $100,000
50% of value of long and short position is required as collateral (margin requirement)
Initial Margin Requirement = 50%
Margin requirement is subtracted from Equity
Remainder is matched dollar for dollar for total buying power

31. Margin Call:
If the Total Equity in your portfolio falls below 30% of the value of your long + short positions, your team will receive a “margin call”.
SMG will automatically liquidate a portfolio that falls below the 30% rule until the minimum margin requirement of 30% is met. 31

32. Investment Basics

33. Different Types of Investments:
Investment Basics
Different Types of Investments:
Insured Savings Accounts
Savings Bonds
Certificates of Deposit
Treasury Bonds
Corporate Bonds
Mutual Funds
Stocks
ETFs
Collectibles
Commodities

34. The RISKIER the Investment - The HIGHER the Return
Investment Basics
The RISK to RETURN Relationship:
The RISKIER the Investment -
The HIGHER the Return

35. Investment Basics
The Difference Between Stocks, Bonds, and Mutual Funds
Stocks: You own a piece of the company
You make money if the company does well
Bonds: You loan money to a corporation or government
You earn the interest
Mutual Funds & ETFs: You own one portion of a collection of stocks, bonds, or other securities

36. Investment Basics
The Three Main Markets:
NYSE:
New York Stock Exchange Oldest, largest, best-known stocks
NASDAQ: (National Association of Securities Dealers Automated Quotations) Large, mid-sized, and small growth companies
AMEX:
American Stock Exchange Mid-sized growth companies

37. The Difference Between Large and Small Companies:
Investment Basics
The Difference Between Large and Small Companies:
Large:
Often have high prices
Low risk of failure
Some pay regular dividends
Small:
Potential for growth is greater
Generally prices are lower

38. Pay dividends based on performance of the company
Investment Basics
Common Stocks:
Pay dividends based on performance of the company
Have higher risk but may have higher reward
Preferred Stocks:
Dividend amount is preset
Dividends are paid on preferred stocks before common stocks
Have lower risk but may limit reward

39. Over-The-Counter Stocks
A security which is not traded on an exchange, usually due to an inability to meet listing requirements. For such securities, brokers/dealers negotiate directly with one another over computer networks and by phone. The NASD carefully monitors their activities.
Be very wary of some OTC stocks, the OTC:BB (Bulletin Board) stocks are either penny stocks or may hold bad credit records.

40. More shares are created at a lower price per share
Investment Basics
Stock Splits:
More shares are created at a lower price per share
Stockholders profit if stocks go up
Indicated with an (s) in the paper
Ex: Dell $109  $54

41. Mutual funds
Closed-ended funds may be traded just like the stocks traded on the NYSE, NASDAQ and American Stock Exchanges.
Open-ended mutual funds can also be traded but cannot be short sold or short covered.

42. Blue Chips the largest and most profitable stocks
Investment Basics
Other Terminology:
Blue Chips the largest and most profitable stocks
Bull Market a market that is rising
Bear Market a market that is falling

43. Why long term investing is the best route?
Investment Basics
Why long term investing is the best route?

44. Investment Basics
DJIA over last 33+ years:

45. What stocks should I buy?
Investment Basics
What stocks should I buy?
PE Ratio
Price-to-earnings ratio.
Earnings = earnings per share or firm profit divided by number of shares.
More earnings per share given stock price results in a lower PE ratio and a better buy.
Find PE ratios in the newspaper.

46. Where to get more information
American Stock Exchange-
NASDAQ-
NYSE-
CNNfn-
CNBC-
EDGAR Database of Corporate Information-
Yahoo! Finance-
Google Finance -

47. Playing the
Stock Market Game
Online Demo

48. Inside SMG WORLDWIDE (Team Pages)
Inside SMG WORLDWIDE (Teams)
Remember: IDs and passwords are case sensitive and must be entered as they appear on the you received from your coordinator.
Remember: Log Off by clicking the icon at the upper right-hand corner of the page to protect your portfolio.
Teams login to their Team Portfolio
The blue Trading tab contains all the functions necessary to compile research and make trades.
The green Market Mysteries tab takes participants to an interactive role-playing game where they become “market detectives” asked to solve “market mysteries.”
Click the SMG WORLDWIDE Globe on the upper left-hand side of the page to return to the SMG WORLDWIDE homepage.
Teams will not appear in rankings until the week after their first trade.
The blue Trading tab contains all the functions necessary to compile research and make trades. 48

49. This team has used some of its “margin”
Account Summary
This team has used some of its “margin”
Account Summary and Transaction Notes
There are 9 functions for portfolio management available through links on the blue portfolio tab.
Account Summary is a summary of the equity in the portfolio.
Account Holdings is a list of all open positions in a portfolio.
Transaction History is a list of all trades that were accepted by the system.
Gains & Losses is a list of all realized gains or losses from the sale or short cover of stocks.
Investor Research is a link to a site where teams may research stocks and companies.
Enter a Trade is what you click to either buy or sell a stock and/or short sell or short cover a position.
Pending Transactions consist of all trades that have not yet been entered into the system.
Transaction Notes include a list of all trades that were attempted, whether or not they were executed.
Americas Indices is a list of several major indices.
Click on Account Summary for a “snapshot” of your current financial status.
Transaction Notes is the first place you should look whenever you suspect your Account Summary is inaccurate.
The SMG WORLDWIDE User’s Guide contains a list of frequently generated error messages.
“Min Maintenance” is 30% of the team’s long + short value. If the teams total equity were to fall below this number, they would receive a margin call.
Check Account Summary and Transaction Notes for the status of your account balance and the trades you have entered. 49

50. The math…..
140,710 / (281, ) = 50%
146, – 140,710 = 5,850.56
84,426 / (281, ) = 30%

51. Account Holdings 51 Enter A Trade & Pending Transactions
Teams have 4 trade options:
Buy
Sell
Short Sell
Short Cover
Teams also have the option of setting Limit Prices on their Buy and Sell orders.
It is a good idea to use the Validate Ticker link before submitting a trade to ensure you are buying the appropriate stock.
Check Pending Transactions to see the status of the trade you have just entered.
The Cancel Order option is not available to those participating in the “Intra-day” session of SMG.
Click on the yellow question mark for answers to frequently asked questions about a specific portfolio function.
Help sections are available for each of the portfolio function pages. 51

52. “Short Sell” and “short cover” are the transactions used when taking a “short” position on a stock. A short position earns a positive return when the stock price falls.
Enter a Trade

56. How to Read the Stock Market Page

57. Stock Table 49 39 ABC 1.30 3.25% 20 3314 40 ---- 80 BBA .40 .53% 26
52 Week
High 52
Week
Low
Stock
Div
Yield %
P/E Ratio
Sales 100s
Close
Net Change 49 39
ABC
1.30
3.25% 20
3314 40
---- 80
BBA
.40
.53% 26
73016 77 75 76
+ 1 66 38
CCI
1.20
1.87% 9
77723 63 64 18 13
LLY
1.78
11.12% 7
13101 16 8
XYZ 0% 62 6 10
- 1

58. 52 Week High/Low
Highest and lowest price a share of the stock has sold for in the past 52 weeks.
Example ABC: High was 49
Example ABC: Low was 39
Sovereignty – complete independence and authority

59. Stock Varies by Newspaper Either company abbreviation or ticker symbol
In A-Z order

60. Div Annual Dividend per Share of Stock
Based on the rate of the Last Quarterly Payout
Annualized Data
Example ABC: $1.30 per share
Example: XYZ: $0 per share

61. Yield Percentage Known as Dividend Yield
A Measure of the Income Produced
by the Stock
Is the Amount of the Dividend
divided by the Price of the Stock

62. Yield Percentage Achieved by Dividing the Annual
Dividend by the Day’s Closing Price
Example: ABC 1.30/40 = .0325
or as a percentage: 3.25%

63. P/E Ratio PRICE- EARNINGS RATIO Ratio: latest closing price
of the stock to the latest available annual earnings per share of the firm
Trailing P/E: is what is reported in the financial section of newspapers
Forward P/E: based on forecasting net year’s future expected earnings

64. P/E Ratio Example: ABC – 20 P/E Ratio
Indicates that ABC is selling for 20 times the company’s earnings
Example: XYZ – P/E Ratio is 62
Indicates that XYZ is selling for
62 times the company’s earnings

65. Sales 100s
This represents the volume of transactions on the trading day
Bought or Sold
Presented in hundreds, simply multiple by 100
Example: ABC – 3314
Indicates that 331,400 shares traded

66. High/Lows This represents the highest and
lowest selling price of the stock
for the day.
Example: ABC – high of 40
low of 39

67. Close This represents the price of the last stock sold for the day
Example: ABC – closed at 40

68. Net Change This lists the net change between
the closing price for the stock for
the day and the closing price on the previous trading day
Example: BBA: Today’s Close: 76
Net Change: + 1
Previous Day: 75

69. Earnings per Share A means of valuing common stock.
Part of a firm’s profit that is
allocated to each outstanding
share of common stock.
Can be a good indicator of fiscal health

70. Earnings per Share Many investors carefully watch this number
In general, higher earnings per share means better dividend and overall
stock performance.

71. Earnings per Share Calculated by dividing the
closing price on the day being
consider by the P/E ratio.
Example: Today’s Close P/E Ratio
Earnings per Share:
ABC – $2.00