the stock market game program a classroom activity for students grades 4 - 12
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The Stock Market Game The Stock Market Game ProgramProgram
A classroom activity for students grades 4 - 12
Stock Stock Market IQ Market IQ QuizQuiz
Investment BasicsInvestment Basics
True or False
1. Stocks are items found in the storeroom of a grocery store.
2. Only rich people invest in the stock market.
3. Most stocks on the stock market are sold by the United States Government.
4. If the stock market goes up 30 percent one year, it will fall by 30 percent in the next year.
Investment BasicsInvestment Basics
Investment BasicsInvestment Basics
5. Any stock that goes up in price must eventually come back down.
6. Bears, Bulls, and Pigs are found in the stock market.
7. Stock prices are set by the Securities and Exchange Commission, a regulatory agency of the U.S. government.
8. Stock markets are open on business days around the clock, around the world.
9. Sometimes companies buy their own stocks on the stock market.
10. It is hard to buy a good stock today because all the good ones have already been purchased.
11. Buying stocks is a sure way to make money.
12. Corporations sell new issues of stock on the New York Stock Exchange.
Investment BasicsInvestment Basics
13. “Insider” stock trading means that trading stocks takes place inside a building.
14. People can buy stocks on the internet.
15. When the stock market goes up, it causes the economy to grow.
From Learning from the Market, © National Council on Economic Education, New York, NY
Investment BasicsInvestment Basics
Stock Stock MarketMarket
Game Game BasicsBasics
The game runs for ten weeks in the Fall and ten weeks in the Spring
Each team begins with a hypothetical $100,000
Teams may buy, sell, short sell, or short cover their stocks
SMG BasicsSMG Basics
Teams should have three to five players
Only common stocks listed on the American, New York, and NASDAQ Stock Exchanges may be traded
SMG BasicsSMG Basics
Mutual funds may be traded
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.
A 2% brokers fee is charged for each transaction
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
SMG BasicsSMG Basics
The team with the highest portfolio equity at the end of the game wins
Portfolios are not liquidated at the end of the game
Portfolio equity in the tenth week is used for final rankings
SMG BasicsSMG Basics
How Does How Does the the Competition Competition Work?Work?
Rules of the Rules of the Stock Market Stock Market GameGame
Teams need Internet access to play
Transactions are made at the SMG WorldWide site at: www.smgww.org or http://stockmarketgame.org/ login.html
SMG of PA operates on ‘real time’ trading
Trades are processed within 15 – 20 minutes
SMG RulesSMG Rules
Stock splits and cash dividends are automatically computed into team portfolios
5% interest is earned on cash balance
Portfolios are updated and available on a daily basis
Rankings are updated every weekend
Stock ticker symbols are used and can be looked up on the game pages
SMG RulesSMG Rules
Trades entered after 4:00 p.m. will be processed at 9:35 a.m. the following day.
ROGUE STOCK RULE – If a stock has not been traded for seven days it will not be accepted and will not be permitted to be traded even though it is on the three major stock exchanges.
General General In formationIn formation
Buying:Buying:
Must be for a minimum of 100 shares
Must have a closing price of at least $5.00 per share
May set a maximum purchase price limit
General InformationGeneral Information
Selling: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
General InformationGeneral Information
Please Note:
For real time trading price limits are generally not needed except for trades entered after the market close.
General InformationGeneral Information
Short Selling: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
General InformationGeneral Information
Short Covering:Short Covering: Must have already short sold
the stock
May set a maximum price limit
All other rules for selling apply
General InformationGeneral Information
Example: Short Selling and Example: Short Selling and CoveringCoveringExample: Short Selling and Example: Short Selling and CoveringCovering
I am borrowing the stock from the broker (2% brokerage fee) and selling it. Now I’ve got cash.
I feel that IBM stock is going to go down and want to short sell the stock.
General InformationGeneral Information
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.
Example: Short Selling and Example: Short Selling and CoveringCoveringExample: Short Selling and Example: Short Selling and CoveringCovering
General InformationGeneral Information
Long Positions: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
General InformationGeneral Information
Short Positions: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
General InformationGeneral Information
Equity:Equity:
Total Value of Long and Short Positions
+ Cash Balance
= Equity
General InformationGeneral Information
Buying on Margin:Buying on Margin:
You may borrow funds using the stock in your portfolio as collateral for the loan
Interest charged at 7%
Initial Margin Requirement = 50%
General InformationGeneral Information
Borrowing on MarginBorrowing on Margin
50% of value of long and short position is required as collateral (margin requirement)
Margin requirement is subtracted from Equity
Remainder is matched dollar for dollar for total buying power
Playing the Playing the Stock Market Stock Market GameGameOnline Demo
Login into SMG WORLDWIDELogin into SMG WORLDWIDEPlaying SMGPlaying SMG
Inside SMG WORLDWIDE (Teams)Inside SMG WORLDWIDE (Teams)Playing SMGPlaying SMG
The blue Trading tab contains all the functions necessary to compile research and make trades.
Account SummaryAccount SummaryPlaying SMGPlaying SMG
Enter a Trade & Pending TransactionsEnter a Trade & Pending Transactions
It is a good idea to use the Validate Ticker option to ensure you are buying the correct stock.
Playing SMGPlaying SMG
Investment Investment BasicsBasics
Insured Savings Accounts Savings Bonds Certificates of Deposit Treasury Bonds Corporate Bonds Mutual Funds Stocks Collectibles Commodities
Different Types of Investments:Different Types of Investments:Investment BasicsInvestment Basics
The RISK to RETURN Relationship:
The RISKIER the Investment -
The HIGHER the Return
Investment BasicsInvestment 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:You own one portion of a collection of stocks, bonds, or other securities
Investment BasicsInvestment Basics
The Three Main Markets:
NYSENYSE::
NNew YYork SStock EExchange Oldest, largest, best-known stocks
NASDAQNASDAQ:: Large, mid-sized, and small growth companies
AMEXAMEX::
AAmerican SStock ExExchange Mid-sized growth companies
Investment BasicsInvestment Basics
Large: Often have high prices Low risk of failure Usually pay regular dividends
Small: Potential for growth is greater
than for larger companies
Generally prices are lower
The Difference BetweenThe Difference Between LargeLarge and and SmallSmall Companies:Companies:
Investment BasicsInvestment Basics
Common Stocks:Common Stocks: Pay dividends based on performance
of the company Have higher risk but may have
higher reward
Preferred Stocks:Preferred Stocks: Dividend amount is preset Dividends are paid on preferred
stocks before common stocks Have lower risk but may limit reward
Investment BasicsInvestment Basics
Stock Splits: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
Investment BasicsInvestment Basics
Other Terminology:
Blue ChipsBlue Chipsthe largest and most profitable stocks
Bull MarketBull Marketa market that is rising
Bear MarketBear Marketa market that is falling
Investment BasicsInvestment Basics
Why long Why long term term investing is investing is the best the best route?route?
Investment BasicsInvestment Basics
DJIA over last 33+ years:Investment BasicsInvestment Basics
PE RatioPE RatioPE RatioPE 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.
What stocks should I What stocks should I buy?buy?
Investment BasicsInvestment Basics
Where to get more informationWhere to get more informationWhere to get more informationWhere to get more information
American Stock Exchange- www.amex.com NASDAQ- www.nasdaq.com NYSE- www.nyse.com CNNfn- www.cnnfn.com CNBC- www.cnbc.com EDGAR Database of Corporate Information-
www.sec.gov/edgarhp.htm Yahoo! Finance- http://finance.yahoo.com
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