Equities, Futures, & OptionsEquities – • Shares of stock in corporations• Large number of buyers and sellers• Access to reliable information

Market Efficiency – • Cost of shares fluctuate due to a variety of circumstancesNumber of sharesExpectationsProspect for growth

Efficient Market Hypothesis –

The price of stocks is usually rightBargains are not found easily The EMH tries to explain this situationSome investors believe that it does not

matter which stocks you purchasePortfolio Diversification–Do not put all your eggs in one

basket–Buy stocks on the internet or use a

stockbroker

Organized Stock ExchangesSecurities Exchanges – place where buyers and

sellers trade securities.NYSE – New York Stock Exchange• Oldest, largest and most prestigious• Located on Wall Street - More than 3,000

stocks• Approx 1400 seats or memberships• Members pay to join and vote on the rules

and regulations• Requirements relate to profitability and size

Organized Stock Exchanges

AMEX – American Stock Exchange• Located in NYC – 1,000 Stocks• Second largest• Companies represented are smaller

and more speculative

Regional Stock Exchanges – • Larger and smaller corporations• Chicago, Philadelphia, Boston,

Memphis, and Pacific

Organized Stock ExchangesGlobal Stock Exchanges – • Sydney, Tokyo, Hong Kong• Assisted by advances in technology

Over-the-Counter Market –•Majority of stocks are traded here•Electronic marketplace for securities•National Market System – computer network•NASDAQ – Buy and sell stocks in all markets (NYSE, AMEX, and OTC)• Few OTC stocks pay dividends

Stock PerformanceDow-Jones Industrial Average – (DJIA)• Most popular and widely used• Average closing price of 30 sample

stocks• No longer a mathematical average• Percentage change of the index is most

importantStandard & Poor’s 500 – (S&P 500)• Uses the price change of 500 stocks• Reports on stocks listed on the NYSE,

AMEX, and OTC

Stock PerformanceBull Market – • Strong Market• Prices move up

Bear Market – • Mean Market• Prices move down

FuturesTime is an attribute of a financial

assetSpot Market• Immediate transaction at the

prevailing priceFutures Market – Marketplace for

futures contracts• Futures Contract – agreement to

buy or sell in the future at a predetermined price• New York Mercantile Exchange

Options Market

Contracts to buy or sell financial assets in the future

Option exists to back outCall Option – buy a share of stock at

a specific price in the futurePut Option – sell a share of stock at a

specific price in the future