Introduction To Stocks

MCR TRADING
 What is a Stock?
When you purchase a stock from a company, you become a
shareholder, and the small piece you own is called a share.

Investors buy and own stocks in hopes that the company will succeed.
When the company does well, its stock owners share in those profits.

Conversely, shareholders can also expect their returns to be diminished

if the company underperforms or declines. And in the worst-case
scenario, a stock owner's shares could become worthless if the
company was to go bankrupt.

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Investors can
Companies can Private companies "go public" to raise There are two primary
buy and sell
issue their stock money for business initiatives such as ways that shareholders
public stocks by
shares either launching new products or services can earn returns on their
privately or expanding its reach. They do this
opening an
investments: capital
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account with a
publicly. through IPO’s gains and dividends.
stock broker.
 Tickers
A stock ticker is how information about a stock is presented to investors. A stock ticker symbol is a short code used to identify a
company that issues stocks or securities. These identification codes were designed by the exchanges and kept short to help
investors and traders easily identify them.

There may be up to four letters on the New York Stock Exchange. The Nasdaq
uses up to five, but some may use less. The Coca-Cola Company, for instance,
uses the ticker symbol KO.

Knowing a firm's ticker symbol is vital when it comes to buying or selling shares.
If a trading friend talks about a trending stock, and another trader enters the
wrong ticker symbol while making a trade, that trader ends up with the wrong
asset. That can be a costly mistake.

When a ticker symbol has an "E" after its name, that means the company has
not met regulatory rules for financial reporting.

Companies can offer more than one type of stock, so Video

there may be a need to have more than one ticker.
Tickers can add an extra letter or use a period or
hyphen within the code to let people know there are
different stocks in one company.
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 Market Hours
The pre-market trades from 4 a.m. to 9:30
a.m. ET.
The regular market trades from 9:30 a.m.
to 4 p.m. ET.
The after-hours market trades from 4
p.m. to 8 p.m. ET

Pre-market trading is the period of trading activity that occurs before the
regular market session. Many investors and traders watch the pre-market
trading activity to judge the strength and direction of the market in anticipation
of the regular trading session.

After-hours trading is securities trading that starts at 4 p.m. U.S. Eastern Time
after the major U.S. stock exchanges close. The after-hours trading session
can run as late as 8 p.m, though volume typically thins out much earlier in the
session. Website
Traders and investors engage in after-hours trading for a variety of reasons. They may prefer trading
with fewer market participants or their schedules may require it. They may want to take positions as a
result of news that breaks after the close of the stock exchange. Or, they may want to close out a position
before they leave on vacation.
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 Options
An options contract offers the buyer the opportunity to
buy or sell before a certain date and at a specified price

Each options contract will have a specific expiration

date by which the holder must exercise their option. The
stated price on an option is known as the strike price.

Options are versatile financial products. These contracts

involve a buyer and seller, where the buyer pays a
premium for the rights granted by the contract.

Calls
Call options allow the
holder to buy the asset at a A call option gives the holder the right, but not the obligation, to buy
Example of a trade
stated price within a the underlying security at the strike price on or before expiration. A
c = call p = put
specific timeframe. Put call option will therefore become more valuable as the underlying
$SPY $410c @ $1.26
options, on the other hand, security rises in price.
allow the holder to sell the Ticker - $SPY
asset at a stated price Strike - $410c
within a specific timeframe. A long call can be used to speculate on the price of the underlying Premium - @ $1.26
rising, since it has unlimited upside potential but the maximum loss
is the premium (price) paid for the option
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 Options p2
Puts

Opposite to call options, a put gives the holder the right, but not the
obligation, to instead sell the underlying stock at the strike price on or
before expiration. A long put, therefore, is a short position in the underlying
security, since the put gains value as the underlying price falls. Protective
puts can be purchased as a sort of insurance, providing a price floor for
investors to hedge their positions

Suppose that Microsoft (MFST) shares trade at $108 per share and you
believe they will increase in value. You decide to buy a call option to benefit
from an increase in the stock's price. You purchase one call option with a
strike price of $115 for one month in the future for 37 cents per contact. Your
total cash outlay is $37 for the position plus fees and commissions (0.37 x
100 = $37). In other words, the profit in dollar terms
If the stock rises to $116, your option will be worth $1, since you could exercise would be a net of 63 cents or $63 since one
the option to acquire the stock for $115 per share and immediately resell it for option contract represents 100 shares [($1 -
$116 per share. The profit on the option position would be 170.3% since you 0.37) x 100 = $63].
paid 37 cents and earned $1—that's much higher than the 7.4% increase in the
underlying stock price from $108 to $116 at the time of expiry.
 Following a Callout
In the world of Trading, you’ll find experienced traders that share
traders they are entering. These are called callouts or signals.

As you can see on the left, this is an example of an Options trade that they are
entering. To follow this trade, here’s how you’d go about it:

BTO means Buy to Open. This means that you are to open the trade instantly

$SHOP is the ticker, this is the Stock they're looking to enter a trade on, which is
Shopify

$40 is the Strike Price they are entering at

C stands for Calls which means a buy

12/30 is the expiration date of the Option, this means they're hoping for the price of
Shopify to close above $40 before the 30th December. If it does, they'll make money

@ 0.67 is the premium they will be paying on the options contract

 Dividends
A dividend stock is a publicly traded company that
In order to collect dividends on a stock, you simply need to own shares
regularly shares profits with shareholders through
in the company through a brokerage account. When the dividends are
dividends. These companies tend to be both
paid, the cash will automatically be deposited into your account.
consistently profitable and committed to paying
dividends for the foreseeable future.
Companies that pay a regular dividend generally pay them consistently
over time, in part by setting the dividend amount to ensure that it's
sustainable in both good and bad years. Regular dividends are usually
paid quarterly, although they can also be paid monthly, biannually, or
annually.

Not all companies pay dividends, but many do. Roughly 75% of
companies in the S&P 500 pay a regular dividend.

Larger and slower-growing businesses are more likely to pay dividends to

their investors than smaller, faster-growing companies. Growing
businesses need to retain their earnings to continue to expand, while
large, established companies are already profitable. Most companies with
plenty of available cash choose to pay a dividend.

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 ETF’s
Exchange-traded funds, better known as an ETFs, are similar in many
ways to mutual funds. They generally track the price of a basket of
assets (like the S&P 500) - making it easy for investors to diversify
their portfolios by gaining access to an entire asset class. As their
name suggests, they trade on exchanges and can be bought and sold
like stock via a traditional brokerage account.

ETFs are considered to be low-risk investments because they are

low-cost and hold a basket of stocks or other securities, increasing
diversification.

ETFs provide lower average costs because it would be expensive for

an investor to buy all the stocks held in an ETF portfolio individually.
Investors only need to execute one transaction to buy and one
transaction to sell, which leads to fewer broker commissions because
there are only a few trades being done by investors.
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Brokers typically charge a commission for each trade. Some brokers even
offer no-commission trading on certain low-cost ETFs, reducing costs for
investors even further. Website
 Mutual Funds
Mutual funds are investment strategies that
allow you to pool your money together with The price of the mutual fund, also known as its net asset value
other investors to purchase a collection of (NAV) is determined by the total value of the securities in the
stocks, bonds, or other securities that might be portfolio, divided by the number of the fund's outstanding shares.
difficult to recreate on your own. This price fluctuates based on the value of the securities held by
the portfolio at the end of each business day. Note that mutual
fund investors do not actually own the securities in which the fund
invests; they only own shares in the fund itself.

Mutual funds can be a cost-effective way to invest. While

individual purchase minimums may vary by fund, most
funds will let you buy shares with as little as $2,500, and
some can be as low as $100.

There are a variety of fees that may be associated with mutual funds.
Some funds come with transaction charges for buys and sells or
commissions known as loads. And there are funds that charge a
redemption fee if you sell shares you've only owned for a short time.

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Hedge Funds
A hedge fund is a limited partnership of private investors whose money is
managed by professional fund managers who use a wide range of strategies to
earn above-average investment returns.
Usually high net worth individuals will invest their money into these hedge
funds. Their money is then managed and invested via professional traders. The
hedge fund will take a small % of profit made as a fee.

Investments in hedge funds are considered illiquid as they often require

investors to keep their money in the fund for at least one year, a time known as
the lock-up period. Withdrawals may also only happen at certain intervals such
as quarterly or bi-annually.

As investors research to identify hedge funds that meet their investment goals,
they often consider the fund or firm's size, the track record and longevity of the
fund, the minimum investment required to participate, and the redemption
terms of the fund.

Website The biggest hedge fund in the world is BlackRock.

They manage over $10 trillion worth of assets
around the world
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 Indices
Indices are single markets that are made up of a selection of stocks. An index's price tracks the combined value of every stock
listed within it. Comprised of some of the largest global companies, they are seen as indicators of stock market and economic
performance.

Let's take the Dow Jones as an example.

The Dow consists of 30 large US companies, including Apple, IBM
and Microsoft. If the stock prices of these companies go up overall,
the Dow will go up too. If they go down, the Dow will fall. By
measuring the performance of 30 major stocks, the Dow gives an
impression of the overall market.

If the US economy is booming, it's

likely these major companies will also
be performing well. This is because
typical characteristics of a strong
economy - such as positive consumer
sentiment, high spending and strong
GDP output - will also benefit stocks
within that economy. So looking at the
Dow Jones can give a quick snapshot
of how the US economy is performing.
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 Bonds
Bonds are like IOUs. When you buy one, you’re basically lending
money to a government or company for a fixed period of time in
return for interest. The money you lend is known as the principal, or
face value. Over the course of the bond you receive regular interest
payments, called coupons. And provided the institution doesn’t go
bust, at the end of the agreed period you are paid back your
principal.
There are several types of bonds available to investors. The most
common:

Government bonds. IOUs issued by a government to support their

spending and obligations. Two examples are Gilts (UK government
bonds) and Treasuries (US government bonds).

Corporate bonds. Companies ask people to pool together money for a

loan and then aim to repay what they owe from their earnings and
cash flow.
Bonds come with several potential benefits. One that's attractive to some investors are the steady, Video
regular interest payments that supplement their income.

Another is that bond and share prices historically tend to react differently to changes in the economic Website
cycle. Because they generally move independently of each other, an investment portfolio that holds both
is likely more balanced and less prone to shed significant value.
 Dollar Cost Averaging
Dollar cost averaging is a strategy in which investment
positions are built by investing equal sums of money at regular
intervals, regardless of the asset’s price or what is going on in
the financial markets.

These regular investments can be in terms of a fixed amount of

currency or a fixed number of shares. The intervals can be
weekly, monthly, yearly or whenever suits an individual’s
investment plan the best.

A dollar cost averaging benefit is that it takes emotional factors

out of investing. Since you are regularly making investments no
matter what the market conditions are, emotions are eliminated
This strategy enables investors who do not out of the decision-making process. For example, if the market is
Video have a large lump sum of money to build a on a downswing, some investors might panic and sell off their
position in a certain product over time. For holdings. With this approach, it can be seen as an opportunity to
example, some investors might have buy at low prices, keeping in mind that this strategy is typically
$10,000 to invest at once. Whereas, other used for long term investment horizons.
Website individuals might not have such a sum at a
certain time, but can use this strategy to
build up to a position worth $10,000.
 Sectors
The U.S. stock market includes thousands of companies, and it’s A stock market sector is a group of public
easy to get analysis paralysis at the thought of choosing which companies that share similar business activities,
to invest in. To help simplify things a bit for investors, the stock products and services, or characteristics. There are
market is broken down into several different sectors that include 11 sectors of the U.S. stock market.
companies with similar characteristics.
Energy Sector
The energy sector is made up of companies that work
in energy sources, equipment, and services.
Companies in this sector engage in a wide range of
products and services, including drilling, energy
exploration and production, storage and
transportation, marketing, refining, and more. The
energy sector doesn’t include most renewable energy
companies. Instead, it’s primarily dominated by oil
and gas, along with coal and other consumable fuels.
Some of the largest companies in the energy sector
are ExxonMobil and Chevron.

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 Sectors p2
Materials Sector Industrials Sector

The materials sector is made up of companies that The industrials sector includes companies across a wide
manufacture and market goods used in manufacturing. range of different goods and services. Included in the
Included in the materials sector are companies that industrials sector are aerospace and defense,
produce chemicals, construction materials, containers construction, engineering, electrical equipment,
& packaging, metals, paper, and forest products. Some machinery, commercial supplies, transportation,
of the largest companies in the materials sector are infrastructure, and some professional services. Some of
Sherwin-Williams and DuPont. the largest companies in the industrials sector are
Honeywell, Boeing, and Union Pacific.

Consumer Discretionary Sector Consumer Staples Sector

The consumer discretionary sector is made up of those Opposite of consumer discretionary products, the consumer
companies that produce goods that consumers want but staples category is made up of those products that people view as
don’t necessarily need. These companies tend to be needs and that sell no matter how the economy is doing. Included
cyclical since they do well when the economy is booming in the consumer staples sector are food, beverages, tobacco,
but not when the economy is down. Some of the largest household products, and personal care products. Some of the
companies in the consumer discretionary sector are largest companies in the consumer staples sector are Procter &
Amazon, Tesla, and Home Depot. Gamble, Walmart, and Coca-Cola.
 Sectors p3
Healthcare Sector Financials Sector

The healthcare sector has two primary categories of The financials sector includes companies in areas of finance.
companies: healthcare equipment & services companies and Some of the more common industries in this sector include
pharmaceutical and biotechnology companies. The sector banking, mortgages, financial services, consumer finance,
covers everything from healthcare equipment, supplies, asset management, capital markets, financial exchanges,
distributions, services, facilities, technology, research, REITs, insurance, and more. Some of the largest companies in
development, and more.Some of the largest companies in the the financials sector are Berkshire Hathaway, Visa, and
healthcare sector are Johnson & Johnson, UnitedHealth JPMorgan Chase.
Group, and Pfizer.
Communication Services Sector

Information Technology Sector The communication services sector includes many companies
across two main categories of communications:
The information technology sector includes a wide range of
telecommunication services and media & entertainment. On the
companies involved in the manufacturing, distribution,
telecommunication services side, you’ll find providers of
market, and more of both hardware and software. Some of
wireless, fiber-optic, cable, and internet services. On the media
the most common components within this sector include IT
& entertainment side are media and broadcasting companies,
services, software, communication equipment, hardware,
as well as entertainment companies, streaming services, social
electrical equipment, and more. Some of the largest
media, and more. Some of the largest companies in the
companies in the technology sector are Apple and Microsoft.
consumer services sector are Facebook and Alphabet (the
parent company of Google).
 Sectors p4
Utilities Sector Real Estate Sector

We’ve already talked about the energy sector, which includes The real estate sector is made up of companies involved in
companies that explore, produce, and store energy sources. The the development and management of real estate. A large
utilities sector is made up of those companies that deliver portion of this sector is made up of real estate investment
energy sources to consumers. It includes electric and gas trusts (REITs), but it also includes other real estate leasing,
utilities, water utilities, and many renewable energy companies. management, and development companies. Some of the
Some of the largest companies in the utilities sector are Duke largest companies in the real estate sector are American
Energy, NextEra Energy, and The Southern Company. Tower Corp. and Simon Property Group.

I know that was a lot of text but this is a crucial part

that needs to be learnt. It’ll help you categorise your
stocks and pickings when you're next looking at
potential investments
 The New York Stock Exchange
The New York Stock Exchange (NYSE) is a stock
exchange located in New York City that is the largest The New York Stock Exchange uses two methods of trading:
equities-based exchange in the world, based on the total brokers and all-electronic. Regardless of the method of
market capitalization of its listed securities. exchange, all stock transactions are an auction.

Brokers actively trade stocks on the floor of the NYSE. Buyers and
When you hear of stocks, you immediately think of Wall sellers auction securities for the highest price. Brokers represent the
Street and the New York Stock Exchange entity buying the stock, whether it's for a retail brokerage company
or institutional investors such as pension funds. The brokers set the
"bid" price, which is the price you're willing to pay for the stock.
The dealers match up the brokers with the stock sellers, who
submit an "ask" price. It's usually higher than the bid price. In this
way, it's like selling a home. The dealer is like the real estate agent,
who puts the buyer and seller together. Dealers get to pocket the
difference between the ask and bid price, minus fees and
expenses, for their work.
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Most of the transactions occur electronically.
A computer acts as the dealer, matching up
buyers and sellers. Even the brokers and
dealers get their information and trade Video
electronically.
 Insider Trading
Insider trading refers to the practice of
purchasing or selling a publicly-traded By non-public information, we mean that the information is not legally out in
company’s securities while in possession the public domain and that only a handful of people directly related to the
of material information that is not yet information possessed. An example of an insider may be a corporate executive
public information. or someone in government who has access to an economic report before it is
publicly released.

Here’s another example: The CEO of a company divulges important information

about the acquisition of his company to a friend who owns a substantial
shareholding in the company. The friend acts upon the information and sells all
his shares before the information is made public.

There's been many big names famous for insider trading such as Martha
Stewart and Jordan Belfort

If someone is caught in the act of insider trading, they can either be sent to
prison, charged a fine, or both. According to the SEC in the US, a conviction for
insider trading may lead to a maximum fine of $5 million and up to 20 years of
imprisonment.

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 Penny Stocks
A penny stock typically refers to the stock of a small company that
trades for less than $5 per share.

In the past, penny stocks were considered any stocks that traded for less
than $1 per share. The U.S. SEC has modified the definition to include all
shares trading below $5.

Penny stocks are usually associated with small companies with a lack of
liquidity, meaning that there are few ready buyers in the marketplace. As
a result, investors may find it difficult to sell stock since there may not be
enough buyers. Because of the low liquidity, investors might have
difficulty finding a price that accurately reflects the market.

Due to their lack of liquidity, wide bid-ask spreads or price quotes, and
small company sizes, penny stocks are generally considered highly
speculative. In other words, investors could lose a sizable amount or all of
their investment.
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Due to their low volume, penny stocks tend to be more volatile than
established equities. This means high opportunities for both gains and
losses, and investors should be careful to understand both the risks and
benefits. Video
 IPO’s
Startup companies or companies that have been in business for
When a private company first sells shares of stock to the
decades can decide to go public through an IPO. Companies
public, this process is known as an initial public offering
typically issue an IPO to raise capital to pay off debts, fund growth
initiatives, raise their public profile, or to allow company insiders to
A lot of people trade IPO’s because of the volatility.
diversify their holdings or create liquidity by selling all or a portion
During the first few weeks of an IPO, price will make
of their private shares as part of the IPO.
large moves in order find the right value for the stock.

Public companies are subjected to the rules and

regulations of a governing body. One of the rules is that
the company is required to publicly disclose financials,
such as accounting information, tax and profits. IPOs
also carry significant costs and could require the
company to raise additional funding if its shares
perform poorly.

Trading or investing in IPO shares can be riskier than

getting exposure to established stocks, due to the
unpredictability of the new listing.

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 Types of Stocks
Investors have different objectives, such as growth or income,
and different risk profiles and different investment horizons.
Hence, investors seek stocks that satisfy their objectives. To
ease choosing, stocks are categorized according to their
investment characteristics.
Blue Chip Stocks
Blue-chip stocks are stocks of large, stable companies with a long history of
stable earnings and dividends, and are typified by the stocks composing the Dow
Jones Industrial Average, including General Electric, IBM, Microsoft, and Pfizer.
Because of their large size, there is less potential for high growth, so most of the
return of these stocks is in the form of dividends. However, capital gains can be
earned from these stocks if they are bought in a bear market, when stock prices
are depressed overall or held for a long time. For instance, during the Great
Recession of November and December, 2008, and the early part of 2009,
Microsoft was trading below $20 per share, whereas before this, Microsoft had
been trading at around $30 per share for a long time. By mid-February 2020, the
stock peaked at $185 per share.

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 Types of Stocks p2
Income Stocks Cyclical Stocks
Income stocks generate most of their returns as dividends, Cyclical stocks cycle with the economic cycles, going up
and the dividends unlike the dividends of preferred stock or strongly when the economy is growing and declining as the
the interest payments of bonds may grow continuously year economy declines. Most of these companies supply capital
after year as the companies' earnings grow. These equipment for businesses or big ticket items, such as cars and
companies have a high dividend payout ratio because there houses, for consumers. Some examples include Alcoa,
are few opportunities to invest the money in the business Caterpillar, and Brunswick. The best time to buy and sell these
that would yield a higher return on stockholders' equity. stocks is at the bottom and top of a business cycle,
Hence, many of the these companies are already very large, respectively.
and are also considered blue-chip companies, such as
General Electric.
Defensive Stocks

Defensive stocks are stocks of companies resistant to economic cycles, and may even profit from them. When consumers and
businesses cut back spending, some businesses profit, either because they offer a way to cut costs, or because they have the
lowest prices. For instance, during the Great Recession of late 2008 and early 2009, people tried to save by doing more for
themselves. For instance, many people starting cutting hair for their families, or coloring their own hair to save the $200 that
some beauty shops charge. This increased business for manufacturers of hair cutters and coloring kits. Auto repair shops do
better, because people cut back on the purchase of new cars, but spend more for maintenance and repairs for their older
vehicles. And while most retailers were hurting significantly during the Great Recession, WalMart was one of the few that
actually thrived, since Wal-Mart is recognized as providing lower prices than other retailers.
 Sectors p3
Growth Stocks Tech Stocks
Growth stocks are stocks of companies that reinvest most of their Tech stocks are the stocks of technology companies,
earnings into their businesses, because it can yield a higher return which make computer equipment, communication
on stockholders' equity, and ultimately, a higher return to devices, and other technological devices. Most tech
stockholders, in the form of capital gains, than if the money were stocks are listed on NASDAQ. The stocks of most tech
paid out as dividends. Typically, these companies have high P/E companies are either considered growth stock or
ratios because investors expect high growth rates. Note, however, speculative stock; some are considered blue-chip, such
as Intel or Microsoft. However, tech companies are
that growth stocks are risky. If a growth-oriented company
exposed to significant risk, because research and
doesn't grow as fast as anticipated, then its price will drop as development efforts are hard to evaluate, and since
investors lower its future prospects, so the P/E ratio declines. So technology is continually evolving, it can quickly
even if earnings remain stable, the stock price will decline. Another change the fortunes of many companies, especially
risk is bear markets — growth stocks tend to decline much more when current products are displaced by new products.
than blue-chips or income stocks in a declining market, because
investors become pessimistic, and will sell their stocks, especially
those paying no dividends. One of the main benefits of growth
stocks is that capital gains, especially long-term capital gains
where the stock is held for at least 1 year, are generally taxed at a
lower rate than dividends, which are taxed as ordinary income.
 Sectors p4
Speculative Stocks
Speculative stocks are stocks of companies with little or no earnings, or widely
varying earnings, but hold great potential for appreciation because they are
tapping into a new market, are operating under new management, have the
potential of becoming a monopoly, or are developing a potentially very
lucrative product that could cause the stock price to zoom upward if the
company is successful. Many Internet companies were considered speculative
investments. During the stock market bubble of the latter half of the 1990's,
many of these stocks had ridiculous market capitalizations, and yet, many of
them had virtually no earnings, and many, if not most, have since then,
imploded. A few, such as Amazon, have grown to become major corporations.
Other tech companies, such as Facebook, have become de facto monopolies,
allowing them to earn very high profit margins, which is reflected in their stock
prices.

Many speculative stocks are traded frequently by investors — or some would

say, gamblers — in the hope of making a profit by timing the market, since
speculative stocks range wildly in price as their perceived prospects constantly
change.
 How to Analyse Stocks
Technical Analysis
Technical analysis studies the supply and demand of a
stock within the market. Investors who use technical
analysis believe that a stock’s historical performance
indicates how the stock will perform in the future.

P/E Ratios
A common method to analyzing a stock is studying its
price-to-earnings ratio. You calculate the P/E ratio by
dividing the stock’s market value per share by its earnings
per share.

Earnings Per Share

A company’s earnings per share show how efficiently Book Value

its revenue is flowing down to investors. An Video
increasing EPS is taken as a good sign by investors. Another method used to analyze a stock
is determining a company’s
PEG Ratio price-to-book ratio. Investors typically Website
use this method to find high-growth
The price-to-earnings growth ratio takes the P/E ratio a companies that are undervalued.
step further by considering the growth of a company.
To calculate the PEG, you divide the P/E ratio by the Finviz
12-month growth rate.
 Securities
A security is a financial instrument, typically any financial asset
that can be traded. The nature of what can and can’t be called a
security generally depends on the jurisdiction in which the
assets are being traded.

Equity securities
Equity almost always refers to stocks and a share of ownership
in a company (which is possessed by the shareholder). Equity
securities usually generate regular earnings for shareholders in
the form of dividends. An equity security does, however, rise
and fall in value in accord with the financial markets and the
company’s fortunes.

Debt securities
Debt securities differ from equity securities in an important way; they involve borrowed money and
the selling of a security. They are issued by an individual, company, or government and sold to Website
another party for a certain amount, with a promise of repayment plus interest. They include a fixed
amount (that must be repaid), a specified rate of interest, and a maturity date (the date when the
total amount of the security must be paid by). Bonds, bank notes (or promissory notes), and Treasury
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notes are all examples of debt securities. They all are agreements made between two parties for an
amount to be borrowed and paid back – with interest – at a previously-established time.
 Derivatives
In the most general sense, a derivative is a financial contract whose value is based on something else. Specifically, the term
financial derivative refers to a security whose value is determined by, or derived from the value of another asset. The asset or
security from which a derivative gets its value is called an underlying asset or just underlying.

An underlying asset might come in many forms but are most

commonly stocks, bonds, commodities, interest rate, market
indexes or currencies. The change in the value of a derivative
underlying asset causes a change in the value of the derivative
itself.

Because they involve significant complexity, derivatives

aren’t generally used as simple buy-low-sell-high or
buy-and-hold investments. The parties involved in a
derivative transaction may instead be using the derivative
to:

Hedge a financial position, Speculate on an asset’s price

and Use funds more effectively.

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 Futures
An options contract gives an investor the right, but not the obligation, to buy (or sell) shares at a
specified price at any time before the contract expiration. By contrast, a futures contract requires a
buyer to purchase the underlying security or commodity—and a seller to sell it—on a specific future
date, unless the holder's position is closed earlier.

So with Futures, you're obligated to buy or sell at the expiration date, however you don't need to
pay a premium for the contract unlike options

For example. Assume two traders agree to a $7 per bushel price on a corn futures contract. If
the price of corn moves up to $9, the buyer of the contract makes $2 per bushel. The seller, on
the other hand, loses out on a better deal.

Futures trading hours may differ from stock and options markets. Normal trading hours are often
8:30a.m.– 3:00p.m.

Video Website
 Economic Cycles
The economic cycle is the fluctuating state of an economy from
periods of economic expansion and contraction. It is usually
measured with the Gross Domestic Product (GDP) of a country or
region. Other economic factors, such as employment rates,
consumer spending, and interest rates, can also be used to
determine the stage of the economic cycle.

The economic cycle is a trend of upward and downward

movements of GDP that ultimately determines the overall
long-term growth of an economy.

Once the cycle is complete, it continues from the start again. No

definite rule exists in determining how long each phase lasts; in
fact, expansion phases can last many years before hitting a peak.
However, a healthy economy will always go through a contraction
phase once in a while.
The economic cycle goes through
Video four stages: During the expansion phase, an economy will experience strong
growth, and interest rates will generally be lower but will begin to
Expansion, Peak, Contraction, increase as the expansion matures. The overall production level
increases, and inflation rates begin to rise as the expansion
Website Trough
matures.
 Thanks!
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