Zucchero Pseudo Stock Market Account Summary Terms Available Cash Amount of cash in your account available for trading Withheld Cash Amount of cash reserved as collateral for stocks you have sold short The system will hold 50 collateral for the initial short sale value ID: 744597
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Slide1
How The Market Works!
Ms.
ZuccheroSlide2
Pseudo Stock MarketAccount Summary Terms:
Available Cash – Amount of cash in your account available for trading
Withheld Cash – Amount of cash reserved as collateral for stocks you have sold short. The system will hold 50% collateral for the initial short sale value
Short Sales – Cash from any short sales you placed. The brokerage holds this cash in a special account until you cover your short sale
Commission – $5.00 per trade
Profit – This is the Account value minus the Starting Cash. If your current holdings have a gain but you lost profits in the past, you may still see a negative profit overallSlide3
Short Selling*Upon
making a decision to choose a stock, you are “Taking a Position.” There are two kinds of positions you can choose
from
. A Long or a Short Position
.
*Taking
a long position means purchasing a stock
thinking the
price will
rise
*The
short position is a bit more complicated. When you short you sell the stocks and then buy them back when the price goes down, earning you a profit
.
You Do
not own any shares of XYZ stock however you tell your broker to sell short 100 shares of XYZ, you have carried out shorting a stock. In broker’s lingo, you have set up a short position in XYZ of 100 shares. It’s also explained as ‘you hold 100 shares of XYZ
shortSlide4
Short Selling – Why?You
rely on the price of that
stock going
down,
so
you can then buy it back at a much lower price than you sold it at. The short sale of stock is a gamble that the price of that stock will go down.Slide5
Short Selling - ExampleMs.
Zucchero
goes into a short position, shorting 100 shares of company XYZ. She shorts it at $110 thinking it will decline to at least 85
. At 85,
Ms.
Zucchero
thinks
that XYZ may not decline much further, if at all
.
HOW DO YOU MAKE A PROFIT FROM BORROWED SHARES?!!?!?!?
Ms.
Zucchero
took the stock temporarily
at $110
and paid it back at
$85
. You’ve made 25 per share in profit or 2,500.
Ms.
Zucchero
sold
the borrowed stock for
$11,000
and purchased it again for
$8,500.
$110x100=$11,000 – Borrowed stock
$85x100=$8,500 – Bought stock at a lower price
*PROFIT IS $2,500*
On the other hand, suppose the price of XYZ goes up to 125.
Ms. Z sold
the stock for 11,000 and
now she wants
to retreat from the position.
Ms.
Zucchero
would have
to go into the market now and purchase 100 shares of XYZ for 12,500. You would then be returning the loaned stock at
$12,500
. In this scenario, you’ll have a loss of
$1,250
.