c12s3: investing in equities, futures, and options main idea: ▫equities, or stocks, represent...

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C12S3: Investing in Equities, Futures, and Options Main Idea: ▫ Equities, or stocks, represent ownership of a corporation.

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Page 1: C12S3: Investing in Equities, Futures, and Options Main Idea: ▫Equities, or stocks, represent ownership of a corporation

C12S3: Investing in Equities, Futures, and Options•Main Idea:

▫Equities, or stocks, represent ownership of a corporation.

Page 2: C12S3: Investing in Equities, Futures, and Options Main Idea: ▫Equities, or stocks, represent ownership of a corporation

C12S3: Investing in Equities, Futures, and Options•Key Terms:

▫Efficient Market Hypothesis (EMH)▫Stockbroker▫Seat▫Dow-Jones Industrial Average▫Standard & Poor’s 500▫Spot market▫Futures market▫Options market

Page 3: C12S3: Investing in Equities, Futures, and Options Main Idea: ▫Equities, or stocks, represent ownership of a corporation

C12S3: Investing in Equities, Futures, and Options•Market Efficiency

▫Stocks should be traded at the correct value

▫You are expected to get a good deal

Page 4: C12S3: Investing in Equities, Futures, and Options Main Idea: ▫Equities, or stocks, represent ownership of a corporation

C12S3: Investing in Equities, Futures, and Options•Organized Stock Exchanges

▫Also called securities exchanges, this is where stocks are traded

▫New York Stock Exchange (NYSE) Oldest, largest, most prestigious Has 1,400 seats Lists stocks from about 2,800 companies

Page 5: C12S3: Investing in Equities, Futures, and Options Main Idea: ▫Equities, or stocks, represent ownership of a corporation

C12S3: Investing in Equities, Futures, and Options•Organized Stock Exchanges

Page 6: C12S3: Investing in Equities, Futures, and Options Main Idea: ▫Equities, or stocks, represent ownership of a corporation

C12S3: Investing in Equities, Futures, and Options•Organized Stock Exchanges

▫American Stock Exchange (AMEX) 750 stocks Smaller and more speculative stocks

▫Regional Exchanges Chicago, Pacific, Philadelphia, Boston, Memphis Share some stock listings with NYSE

▫Global Stock Exchanges Operate in large cities like Sydney, Tokyo, Hong

Kong People from around the world trade on them

Page 7: C12S3: Investing in Equities, Futures, and Options Main Idea: ▫Equities, or stocks, represent ownership of a corporation

C12S3: Investing in Equities, Futures, and Options•Over-the-Counter Markets

▫Electronic trade markets Most important: National Association of

Securities Dealers Automatic Quotation (NASDAQ)

Connects more than 80 countries Lists over 4,000 large and small companies

Page 8: C12S3: Investing in Equities, Futures, and Options Main Idea: ▫Equities, or stocks, represent ownership of a corporation

C12S3: Investing in Equities, Futures, and Options•Measures of Stock Performance

▫Dow-Jones Industrial Average Samples 30 stocks to give an idea of overall

performance Measures NYSE

▫Standard & Poor’s 500 Samples NYSE, AMEX and OTC markets

Page 9: C12S3: Investing in Equities, Futures, and Options Main Idea: ▫Equities, or stocks, represent ownership of a corporation

C12S3: Investing in Equities, Futures, and Options•Measures of Stock Performance

▫Bull vs. Bear Markets Bull markets are strong markets with prices

moving up Bear markets are mean markets with falling

prices

Page 10: C12S3: Investing in Equities, Futures, and Options Main Idea: ▫Equities, or stocks, represent ownership of a corporation

C12S3: Investing in Equities, Futures, and Options•Trading in the Future

▫Spot and Future Markets Spot markets allow trades to take place at

the current price Futures markets can drive up the price of

stocks that are expected to rise

Page 11: C12S3: Investing in Equities, Futures, and Options Main Idea: ▫Equities, or stocks, represent ownership of a corporation

C12S3: Investing in Equities, Futures, and Options•Trading in the Future

▫Options Markets Like futures markets, but you can back out of

the deal Call option lets you buy a share at some point

in the future Put option lets you sell a share of stock at

some point in the future

Page 12: C12S3: Investing in Equities, Futures, and Options Main Idea: ▫Equities, or stocks, represent ownership of a corporation

C12S3: Investing in Equities, Futures, and Options•Chapter 12 Quiz in 10 minutes•With a partner, answer “Reviewing the

Facts” 1, 3, 4, 7, 8, 12