March 2, 2024

Trading (quick notes)

Stock Market:

NASDAQ is an acronym for National Association of Securities Dealers Automated Quotation.

The Nasdaq is traditionally home to many high-tech stocks such as Microsoft, Intel, Dell, and Cisco.

It is basically a computerized system which allows trading and provides price quotations on more than 5000 of the more actively traded over the counter stocks.

It was created in 1971 and was the world’s first electronic stock market.

AMEX – American Stock Exchange

AMEX used to be a strong competitor to the NYSE (New York Stock Exchange), but Nasdaq has now taken over this role.

Nowadays almost all trading on the AMEX is in small-cap stocks, exchange-traded funds and derivatives.

NYSE – New York Stock Exchange

NYSE is home to the majority of the world’s largest best known companies. Foreign-based corporations can list their shares on the NYSE if they adhere to certain Securities and Exchange Commission (SEC) rules, known as listing standards.

Bonds:

Municipal Bonds (Munis)

These are debt obligations which are issued by government entities. When you buy a municipal bond you are loaning money to the issuer in exchange for a set number of interest payments over a predetermined period. At the end of that period the bond reaches its ‘Maturity Date’ and the full amount of the original payment is returned to you.

You can get municipal bonds at both taxable and tax-except forms

General Obligation Bonds (GO)

These types of bonds are issued with the belief that the municipality will be able to repay its debt obligation through taxation or revenue from projects. No assets are issued as collateral.

Revenue Bond

Is a municipal bond where the bond is supported from revenue from a project. E.g. toll bridge, railway, stadium etc.

Revenue Bonds allow the municipality to avoid reaching legislated debt limits. This is because this type of bond is not a debt to the municipality instead it must use the project’s revenue money to payback the investor. No revenue = no repayment.

Liquidity

Easy convertibility into cash. A liquid asset or security can be easily bought or sold with little or no impact on price. Most methods of counting money supply include some highly liquid investments such as certificates of deposit. Liquid assets and investments are highly desirable as they may be sold to allow an investor to enter other investments as they arise. On exchanges, liquid investments usually have low bid-ask spreads. See also: Illiquid, Liquidity preference hypothesis.

Pasted from <http://financial-dictionary.thefreedictionary.com/Liquid>

Spot Price

When getting a spot price for a given FX instrument, we actually obtain a price with value date two days into the future (this is just a definition in the world of FX).

Pasted from <http://devnet.mid.dom/TechnicalWritingCommunity/Shared%20Documents/new_business_logic_sources/FX_Specs_Splitting_FX%20Splitting.doc>

Initial Margin

A percentage of the total purchase price of the security which the investor must pay with their own cash.

Maintenance Margin

Is the minimum amount of equity that must be maintained in a margin account. If the cost of the securities increase then the amount of margin in the account must also increase. This is normally some percentage of the total price of the security which is set by the broker.

Margin Account

A brokerage account where the broker lends the customer cash to purchase securities. The loan in the account is collateralized by the securities and the cash in the account.

Trading Strategies:

Volume Research

When researching stocks try to find ones with high volatility at the first and last hours of trading. If it tends to be very volatile during those hours then you may be able to buy or sell at a price which is much higher or lower than its fundamental value. Set your limit orders high so that you may catch a great bargain during these times. 

Trade Today For Tomorrow

Retail investors cannot buy or sell a stock on the same day no more than three times in a five business day period. This is known as a pattern day trader rule. Investors can avoid this rule by buying at the end of the day and selling the next day. This allows the trader to hold stocks for less than 24 hours while avoiding day trading rules.

Gap Trading

If you purchase a stock XYZ for $30 today but expect it to rise to $35 after they announce quarterly earnings after the close of the market day. This means that when the market opens tomorrow, XYZ will open at $35 which creates a $5 gap which is a $5 per share profit for you.