the stock market game program a classroom activity for students grades 4 - 12

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.



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.


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


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


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


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


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


Please Note:

For real time trading price limits are generally not needed except for trades entered after the market close.


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


Short Covering:Short Covering: Must have already short sold

the stock

May set a maximum price limit

All other rules for selling apply


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.


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


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


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


Equity:Equity:

Total Value of Long and Short Positions

+ Cash Balance

= Equity


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%


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


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


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


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:


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


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


Other Terminology:

Blue ChipsBlue Chipsthe largest and most profitable stocks

Bull MarketBull Marketa market that is rising

Bear MarketBear Marketa market that is falling


Why long Why long term term investing is investing is the best the best route?route?


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?


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

the stock market game program a classroom activity for students grades 4 - 12

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