投资学第6版第2章教案

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Stock Margin Trading
• Margin is currently 50%; you can borrow up to 50% of the stock value – Set by the Fed • Maintenance margin: minimum amount equity in trading can be before additional funds must be put into the account • Margin call: notification from broker that you must put up additional funds
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Margin Trading - Initial Conditions Example 1
X Corp 60% 30% 100 Initial Position Stock $10,000 Borrowed Equity $4,000 $6,000
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$100 Initial Margin Maintenance Margin Shares Purchased
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Mechanics of short sales
Borrow shares from broker
Sell the shares
Buy shares from market
Return the shares
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–The inventory of securities owned by the brokerage firm; –The inventory of other brokerage firm; –The holdings of an institutional investor that is willing to lend its securities; –The inventory of securities held in street name by the brokerage firm for investors who have margin accounts with the firm. • An example
ID 0802 0803 0813 0910 Rising Limit Ask price (＄) (＄ price (＄) (＄ 3328 3228 3316 3425 3500 3314 3420 3491 Opening price (＄) (＄ 3210 3311 3417 3488 Offered (RL) 8 10 5 1
Margin Trading - Maintenance Margin Example 3.1
Stock price falls to $70 per share New Position Stock $7,000 Borrowed $4,000 Equity $3,000 Margin% = $3,000/$7,000 = 43%
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Table 4 Illustration of Buying Stock on Margin
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Short Sales
• Purpose: to profit from a decline in the price of a stock or security • Mechanics – Borrow stock through a dealer – Sell it and deposit proceeds and margin in an account – Closing out the position: buy the stock and return to the party from which is was borrowed
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Limit orders video
http://www.investopedia.com/video/play/how -do-limit-orders-work do-limit-orders-
Figure The Limit Order Book for Intel on the Archipelago Market, January 19, 2007
• Types of orders
– Market orders – Limit orders, the key is the limited price, a ceiling price in buying or floor price in selling. – Stop orders. Two special kinds of orders are stop orders(also known as stop-loss orders) and stop limit orders. The key is the stop price. – Stop limit orders
There are 4 companies’ quotations here,If an investor places an market order for 29 RL How would the investor’s broker fill the orders?
Case for stop orders
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Types of Orders
• Market orders—executed immediately – Bid Price(from sellers) – Ask Price(from buyers) • Limite orders—price specified – Limit orders – Stop orders – Stop limit orders
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– Fill-or-kill orders, also known as (FOK) orders, these orders are canceled if the broker is unable to fully execute them immediately. – Discretionary orders,
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• Order size
– When investing common stocks, the investor places an order involving a round lot, an odd lot, or both. • Round lot means that the order is for 100 shares, or a multiple of 100 shares. • Odd lot orders generally are for 1 to 99 shares.
Stop orders
• Once the stock has reached this price, a stop order essentially becomes a market order and is filled. • http://www.investopedia.com/video/play/st op-loss-orders
Figure Price-Contingent Orders
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Buying on Margin
• Using only a portion of the proceeds for an investment • Borrow remaining component • Margin arrangements differ for stocks and futures
Supposed that, you own stock ABC, which currently trades at $20, and you place a stop order to sell it at $15, your order will only be filled once stock ABC drops below $15. Also known as a "stop-loss order", this allows you to limit your losses. "stopHowever, this type of order can also be used to guarantee profits. For example, assume that you bought stock XYZ at $10 per share and now the stock is trading at $20 per share. Placing a stop order at $15 will guarantee profits of approximately $5 per share, depending on how quickly the market order can be filled.
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Margin Trading - Margin Call Example 2
How far can the stock price fall before a margin call? (100P - $4,000)* / 100P = 30% P = $57.14 * 100P - Amt Borrowed = Equity
• Time limit
– Day orders, if a time limit is not specified by the investor, the broker will treat an order as a day order. Week orders and month orders. – Open orders, also known as good-till-canceled(GTC) orders.
CHAPTER 2
Buying and selling Securities
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Outline
• • • • Brokers Orders Margin purchase Short sales
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Brokers
• Full-service • Discount • Deep-discount
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Pre-opening
ID | bid price | Size（RL） ID | ask price | Size（RL） 4 5 3.60 3.54 7 6 4 5 3.65 3.70 1 6
The opening price: (3.60+3பைடு நூலகம்70)/2=3.65＄
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Case for Market orders
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Pre-open Call auction
N | bid price | V（RL） 1 3.80 2 2 3.76 5 3 3.65 5 4 3.60 7 5 3.54 6 N | ask price | V（RL） 1 3.52 5 2 3.57 1 3 3.60 1 4 3.65 6 5 3.70 6
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StopStop-limit orders
let's assume that ABC Inc. is trading at $40 and an investor wants to buy the stock once it begins to show some serious upward momentum. The investor has put in a stop-limit order to buy with the stop price at $45 stopand the limit price at $46. If the price of ABC Inc. moves above $45 stop price, the order is activated and turns into a limit order. As long as the order can be filled under $46 (the limit price), then the trade will be filled. If the stock gaps above $46, the order will not be filled.