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Thread: Can I ask a few simple stock market questions of our gurus?

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    Default Can I ask a few simple stock market questions of our gurus?

    I've been following some of the stock market threads with great interest, but I'm a bit clueless. What is a "put" and a "call"?

    Also, can you explain please just the very very very basic premise of the stock market? Like how buying and selling stocks works. The entire process just seems incredibly overwhelming to me.

    Finally, can you maybe give us newbies a few tips as far as GOOD educational resources? Websites, books, training programs, etc. on stock trading, investing, savings, economics, etc.?

    Thank you all so much for all the amazing advice and education you guys provide. I know that I really really appreciate it.

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    Default Re: Can I ask a few simple stock market questions of our gurus?

    Real Money by Jim Cramer Is a pretty good place to start as a lay person. Don't worry about Put-call at this stage of your investment education. As a new investor you won't have to deal with put-call.

    First learn the basics, then play around a bit with some small investing. Remember that stock buying and selling is gambling. Don't spend more than you can afford while learning about investing.

    Your best bet is to put your money in a mutual fund with a respected financial institution (I'm with ING Direct). They are fairly safe and cheap to get into.


    Promote yourself and earn more money! This is a business that is owned by strippers for strippers. Let's make that money!


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    Default Re: Can I ask a few simple stock market questions of our gurus?

    A "call" is a contract representing the right to buy a certain thing at a certain price at a certain time. For example "I will grant you the right to buy from me 1000 shares of Company ABC in December of this year at $12 each". How much is this right worth? Depends on a bunch of things. Are Company ABC's shares currently worth $1 or $100? How much do people expect the value to change between now and then? And a few other things like dividends, interest rates etc.

    A put is the other way around - "I will grant you the right to force me to buy 1000 shares of Company ABC off you in December of this year at $12 each".

    2 main ways these can be used are for protection and for speculating.

    Protection: Say you have 1000 shares of ABC but are worried about them falling below a certain price. Buy some puts so that you can force someone to buy them off you at a fixed price, thereby limiting your downside risk.

    Speculation: Say you don't own ABC shares but think the company is doomed. Buy lots and lots of puts. When other people realise the company is doomed they will pay $$$ for the puts, because they want them for protection.

    This is drastically simplified, but hopefully still useful as an introduction for you
    Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor
    - Dr John Zoidberg

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    Default Re: Can I ask a few simple stock market questions of our gurus?

    one of the very best places to begin is at The Motley Fool's 'Investing 101'

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    Default Re: Can I ask a few simple stock market questions of our gurus?

    Stock Market Explanation


    Once upon a time, in a village, a man appeared and
    announced to the villagers that he would buy monkeys
    for $10 each.
    The villagers seeing that there were many monkeys
    around, went out to the forest, and started catching
    them. The man bought thousands at $10 and as supply
    started to diminish, the villagers stopped their
    effort. He further announced that he would now buy
    at $20. This renewed the efforts of the villagers
    and they started catching monkeys again.
    Soon the supply diminished even further and people
    started going back to their farms. The offer increased
    to $25 each and the supply of monkeys became so little
    that it was an effort to even see a monkey, let alone
    catch it! The man now announced that he would buy
    monkeys at $50 ! However, since he had to go to the
    city on some business, his assistant would now buy on
    behalf of him.
    In the absence of the man, the assistant told the
    villagers. "Look at all these monkeys in the big cage
    that the man has collected. I will sell them to you at
    $35 and when the man returns from the city, you can
    sell them to him for $50 each." The villagers rounded
    up with all their savings and bought all the monkeys.
    Then they never saw the man nor his assistant, only
    monkeys everywhere!
    Now you have a better understanding of how the stock
    market works.

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    Default Re: Can I ask a few simple stock market questions of our gurus?

    I haven't the time now to go in depth, but I'd suggest that if you need the market explained generally, you need puts and calls in about +/- 5 years time!!

    In basic terms, it is all about supply and demand of individual company stock. But what drives that supply and demand could take years to explain! That said, another trueism that is very prevalent right now, is fear and greed.

    Tread carefully and take the time to learn before you use real money.

    Best wishes.

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    Default Re: Can I ask a few simple stock market questions of our gurus?

    ^^^^

    yeah, don't trust gypsies
    "You have to pray a whole lot to do the things I do"
    Me

    Quote Originally Posted by kaiarose View Post
    I keep reading about how we "sell" our bodies. Um, as far I as can tell I still have mine so it hasn't been sold.
    Quote Originally Posted by ViolaStrings
    ^ I know, we just lease out visual rights for short intervals.
    "

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    Default Re: Can I ask a few simple stock market questions of our gurus?

    Quote Originally Posted by StuartL View Post
    I haven't the time now to go in depth, but I'd suggest that if you need the market explained generally, you need puts and calls in about +/- 5 years time!!

    In basic terms, it is all about supply and demand of individual company stock. But what drives that supply and demand could take years to explain! That said, another trueism that is very prevalent right now, is fear and greed.

    Tread carefully and take the time to learn before you use real money.

    Best wishes.
    Stocks is not about Supply and Demand.

    On March 17th 2008, 1 Billion shares of Bear Stearns was bought. According to supply and demand logic Bear Strearns price should have shot up.

    It is about Price and Value.

    If there are more people who think BSC is worth than what it is trading at, they will buy up till it reaches that price. OTOH, if there are more people who think BSC is worth less than what it is trading now then the price drops.

    Big difference.

    What determines an assets value?
    * Some Idiots use charts
    * Some Idiots use fundamental analysis (Better than charts though)
    (Both are wrong tools)
    * A True way to value any asset is how much cash(profits) it generates for the next 25-30 Years. This however need some fundamental analysis. Of course it is incredibly hard to predict the future. (No chart can ever predict that). But if you apply yourself with enough risk/sensitiviy analysis, you can come close

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    Default Re: Can I ask a few simple stock market questions of our gurus?

    Quote Originally Posted by Melonie View Post
    one of the very best places to begin is at http://www.fool.com/investing/basics/index.aspx The Motley Fool's 'Investing 101'
    Yes! That is an excellent resource.


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    Default Re: Can I ask a few simple stock market questions of our gurus?

    What determines an assets value?
    * Some Idiots use charts
    * Some Idiots use fundamental analysis (Better than charts though)
    (Both are wrong tools)
    agreed ... all they needed to do was let the US Treasury 'value' the stock shares based on whether they were deemed 'worthy' of a taxpayer bailout or not !!!

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