Discussion

Ex. 10.

a) Read the texts and do the tasks below.

b) Describe the chief varieties of speculators on the stock exchange.

A) Bulls, Bears and Stags

The buying of something cheap at one time for the purpose of selling the same thing dearer at another time is speculation. Whilst in a sense all deals are speculations, the term is generally limited to circumstances where profit is made because the same thing has different prices at different times. Anyone who does so is said to be a speculator. A speculator on the stock exchange is a person who backs the judgments he makes about likely developments by buying or selling shares. The chief varieties of speculators on the stock exchange are known as "bulls", "bears" and "stags".

A speculator may buy shares, for which he cannot or does not wish to pay at the time, in the hope that "during the account", i.e. before the date of payment, the price will have risen and he can then sell them at a profit. A buyer who buys like this in the hope of a rise in prices is a "bull".

Bears are pessimistic speculators who expect a fall in share prices. They therefore sell any shares they have now, and even shares they do not have, because, if prices fall as expected, the shares will be available in a few hours or a few days at lower prices than at present.

In both cases the success of the speculation depends both on a correct forecast of the security price movement and on a sufficiently long time interval before payment or delivery must be made. It quite often happens that "bulls" or "bears" are wrong in their anticipations, or that they are convinced that by holding out even beyond settlement day they could still make a profit.

To meet this case a delaying procedure has been evolved which allows the speculators to let their bargains stand over until the following settlement day. This is known as "contango" or "continuation". Arrangements for such "carry-overs" are made on the first day of the new account which is known as "Contango Day".

Stags are speculators who operate in the "new issues" market rather than on the Stock Exchange, although they must use the Stock Exchange before they can realize any profit. What a stag does is to apply for shares that are just being issued and are likely to be over­subscribed. He does not want to keep the shares, or invest in the company that is issuing them, but simply to make a profit out of the issue. The stag expects that the stock, upon issue, will quickly rise to a premium in the market, and he will then sell his stock at a profit. The activities of "stags" have been greatly reduced in recent years.

Words you may need:

Англійський варіант	Російський варіант	Український варіант
bull	«бык», покупатель ценной бумаги, играющий на повышение	«бик», покупець цінної папери, граючий на підвищення
bear	«медведь», продавец ценной бумаги, играющий на понижение	«ведмідь», продавець цінної бумаги, граючий на пониження
stag	спекулянт, покупающий новые ценные бумаги при объявлении подписки в надежде продать их с прибылью после начала торговли на вторичном рынке	спекулянт, що купує нові цінні папери при оголошенні підписки в надії продати їх з прибутком після початку торгівлі на вторинному ринку
speculation	спекуляция, купля-продажа ценных бумаг для получения прибыли	спекуляція, купівля-продаж цінних паперів для отримання прибутку
speculator	лицо, занимающееся спекуляцией	особа, що займається спекуляцією
account	операционный период на фондовой бирже	операційний період на фондовій біржі
anticipation	ожидание	очікування
contango	отсрочка расчета по сделке	відстрочення розрахунку по операції
carry-over	отсрочка сделки	відстрочення операції
new issue	новый выпуск (ценных бумаг)	новий випуск (цінних паперів)
shares that... are likely to be over-subscribed	акции, подписка на которые, по ожи­даниям, превысит предложение	акції, підписка на які, по очікуваннях перевищить пропозицію
premium	премия (сумма, на которую цена, заплаченная за акцию, превышает ее номинальную стоимость)	премія (сума, на яку ціна, заплачена за акцію перевищує її номінальну вартість)

с) Explain how trading in options differs from buying and selling stocks:

b) Options and Short Selling

Not all stock market speculation takes the form of buying and selling stocks whose prices are likely to change. Options and short selling allow a speculator to profit from movements in a stock's price without holding the stock itself.

An option is a security that gives its holder the right, but not the obligation, to buy or sell an asset at a set price during a specified time period. Options are classifed as either call or put options. A "call" is an option to buy a particular asset whereas a "put" is an option to sell it. Examples of options include calls and puts on common stock warrants, and convertible securities.

An investor anticipating a rise in a share can buy a "call" option which, for a specified period, gives him the right to buy this share at an agreed price. If he expects a fall he will buy a "put" option which entitles him to sell. A premium called "option money" is payable for the privilege. If the rise (or fall) in the share is greater than the premium, he will exercise his option and make a profit; if not, he will let the option lapse. In either case his risk is limited to the premium. In a "bull" market most options will be for the "call", in a "bear" market most will be for the "put".

Short selling is a third way to profit from an expected drop in the price of a stock. A short sale is a sale of borrowed shares.

Words you may need:

Англійський варіант	Російський варіант	Український варіант
option	опцион	опціон
short selling	«короткая продажа»	«короткий продаж»
warrant	вариант	варіант
convertible security	конвертируемая ценная бумага	конвертований цінний папір
anticipate	ожидать, предвидеть	чекати, передбачати
option money	опционная премия	опційна премія
to exercise an option	исполнить опцион	виконати опціон
lapse	терять силу	втрачати силу

d) Explain what can help shareholders make decisions about selling or buying shares:

c) Events on the Stock Market raise a lot of questions for anyone holding or thinking of buying shares: "Is it all just a gamble?" "Is this a good time to buy?" "What experts can we turn to for reliable advice about when and what shares to buy?" More and more people nowadays ask the question: "How is the Market?"

Normally, the results of trading on any stock market are widely reported. The financial sections of newspapers around the world carry the complete results of each day's trading. In the US, on each business day the Wall Street Journal containts price quotations. Prices are traditionally calibrated in eighths of a dollar, so:

1/8 = $.125

1/4 = $.25

3/8 = $.375

1/2 = $.50

5/8 = $.625

3/4 = $.75

7/8 = $.875

Changes in quotations can be expressed in per cent and in basis points.

Along with stock price quotations, in the practical world of finance, there are other indications that help to summarize stock market performance, to understand the motion of prices.

There are two types of stock price indications - averages and indices.

The averages are based on small samples of key stocks and comprise the industrial average, transportation average, utilities average and the composite average. The indices draw on a large representative sample of stocks and comprise a set of sectoral, industry and subindustry indices together with a composite equity market index.

There are literally hundreds of stock market indices in use around the world. They differ primarily by the mode of weighting and computation. The bulk of these are weighted by the capitalization of the company's common stock.

In the US the most frequently quoted stock market index is the Dow Jones Industrial Average (DJIA), which is based on the stock prices of thirty large, well-established industrial corporations. Another frequently quoted stock market index in the US is the Standard and Poor's 500 Stock Price Index (S & P 500). It is significantly broader than the DJIA. Many stock market watchers prefer broader averages, in particular, the New York Stock Exchange composite average, which covers all stocks traded on that exchange. In the UK, investors watch the FT-SE 100 Share Index, popularly known as "Footsie". It is an index of 100 leading UK shares listed on the International Stock Exchange and provides a minute by minute picture of how share prices are moving. It started on 3rd January 1984 with the base number of 1,000.

FT index refers to the Financial Times Industrial Ordinary Share Index, also known as the "30 Share Index". This started in 1935 at 100, and is based on the prices of 30 leading industrial and commercial shares. They are chosen to be representative of British industry, rather than of the Exchange. The Institute of Actuaries in London and the faculty of Actuaries in Edinburgh had compiled a broadly-based Actuaries Investment Index each month since 1929. But the advent of ^computerization paved the way for the daily computation of a greatly expanded index, known as the FT-Actuaries All-Share (FT-A) Index, from 1962.

Words you may need:

Англійський варіант	Російський варіант	Український варіант
gamble	азартная игра	азартна гра
calibrate	выражать	виражати
basis point	базовый пункт	базовий пункт
motion	движение	рух
average	индекс курсов ценных бумаг	індекс курсів цінних паперів
index (pi indexes or indices)	фондовый синтетический индекс	фондовий синтетичний індекс
sample	проба, образец	проба, зразок
sectoral	отраслевой	галузевий
weighting	взвешивание (стат.)	зважування (стат.)
computation	вычисление(я), подсчеты	обчислення(я), підрахунки
composite average	составной индекс	складовий індекс

Financial Times (FT) Actuaries All Share Index (FTА) Фондовый индекс всех акций (публикуется газетой «Файнэншл Таймс», Институтом актуариев в Англии и Факультетом актуариев в Шотландии)