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Utilize your financial knowledge, give your answer or opinion to the input question or subject. | What capital gains taxes do I owe on stock sales in India? | "Long term: Assuming you sold stock ABC through a registered stock exchange, e.g., the Bombay Stock Exchange or the National Stock Exchange of India, and you paid the Securities Transaction Tax (STT), you don't owe any other taxes on the long term capital gain of INR 100. If you buy stock BCD afterwards, this doesn't affect the long term capital gains from the sale of stock ABC. Short term: If you sell the BCD stock (or the ABC stock, or some combination therein) within one year of its purchase, you're required to pay short term capital gains on the net profit, in which case you pay the STT and the exchange fees and an additional flat rate of 15%. The Income Tax Department of India has a publication titled ""How to Compute your Capital Gains,"" which goes into more detail about a variety of relevant situations." |
Offer your insights or judgment on the input financial query or topic using your financial expertise. | Is it a wise decision to sell my ESPP stock based on this situation? | ESPP tax treatment is complicated. If you received a discount on the purchase of your stock, that discount is taxable as ordinary income when you sell the stock. Any profit about the market value when the stock was purchased is taxed based upon the holding period of the stock. If you have held the stock less than a year, the profit is taxed at your marginal tax rate (ie taxed as ordinary income). If the stock is held for more than a year, it is taxed at a special capital gains tax rate, which ranges from 0-20% depending on your marginal tax rate (most people pay 15%). |
Share your insights or perspective on the financial matter presented in the input. | Why might it be a bad idea to invest 100% of your 401(k) into a stock index fund? | At your age, I don't think its a bad idea to invest entirely in stocks. The concern with stocks is their volatility, and at 40+ years from retirement, volatility does not concern you. Just remember that if you ever want to call upon your 401(k) for anything other than retirement, such as a down payment on a home (which is a qualified distribution that is not subject to early distribution penalties), then you should reconsider your retirement allocations. I would not invest 100% into stocks if I knew I were going to buy a house in five years and needed that money for a down payment. If your truly saving strictly for a retirement that could occur forty years in the future, first good for you, and second, put it all in an index fund. An S&P index has a ridiculously low expense ratio, and with so many years away from retirement, it gives you an immense amount of flexibility to choose what to do with those funds as your retirement date approaches closer every year. |
Offer your insights or judgment on the input financial query or topic using your financial expertise. | Is there a difference between buying few shares of an expensive stock vs many shares of an inexpensive one? | "Before the prevalence of electronic trading, trading stocks was very costly, dropping from ~15c in the late 1970s to less than a nickel per share today. Exchange fees for liquidity takers are ~0.3c per share, currently. When orders were negotiated exclusively by humans, stocks used to be quoted in fractions rather than decimal, such as $50 1/2 instead of something more precise like $50.02. That necessary ease of negotiation for humans to rapidly trade extended to trade size as well. Traders preferred to handle orders in ""round lots"", 100 shares, for ease of calculation of the total cost of the trade, so 100 shares at $50 1/2 would have a total cost of $5,050. The time for a human to calculate an ""odd lot"" of 72 shares at $50.02 would take much longer so would cost more per share, and these costs were passed on to the client. These issues have been negated by electronic trading and simply no longer exist except for obsolete brokerages. There are cost advantages for extremely large trades, well above 100 shares per trade. Brokerage fees today run the gamut: they can be as insignificant as what Interactive Brokers charges to as high as a full service broker that could charge hundreds of USD for a few thousand USD trade. With full service brokerages, the charges are frequently mystifying and quoted at the time a trade is requested. With discount brokerages, there is usually a fee per trade and a fee per share or contract. Interactive Brokers will charge a fee per share or option only and will even refund parts of the liquidity rebates exchanges provide, as close as possible to having a seat on an exchange. Even if a trader does not meet Interactive Brokers' minimum trading requirement, the monthly fee is so low that it is possible that a buy and hold investor could benefit from the de minimis trade fees. It should be noted that liquidity providing hidden orders are typically not rebated but are at least discounted. The core costs of all trades are the exchange fees which are per share or contract. Over the long run, costs charged by brokers will be in excess of charges by exchanges, and Interactive Brokers' fee schedule shows that it can be reduced to a simple markup over exchange fees. Exchanges sometimes have a fee schedule with lower charges for larger trades, but these are out of reach of the average individual." |
Share your insights or perspective on the financial matter presented in the input. | Is it possible to physically own a share certificate in a company? | "Yes, this is possible with some companies. When you buy shares of stock through a stock broker, the shares are kept in ""street name."" That means that the shares are registered to the broker, not to you. That makes it easy to sell the stock later. The stock broker keeps track of who actually owns which shares. The system works well, and there are legal protections in place to protect the investors' assets. You can request that your broker change the stock to your name and request a certificate from the company. However, companies are no longer required to do this, and some won't. Your broker will charge you a fee for this service. Alternatively, if you really only want one share for decoration, there are companies that specialize in selling shares of stock with certificates. Two of them are giveashare.com and uniquestockgift.com, which offer one real share of stock with a stock certificate in certain popular companies. (Note: I have no experience with either one.) Some companies no longer issue new stock certificates; for those, these services sell you a replica stock certificate along with a real share of electronic stock. (This is now the case for Disney and Apple.) With your stock certificate, you are an actual official stockholder, entitled to dividends and a vote at the shareholder meeting. If this is strictly an investment for you, consider the advantages of street name shares: As to your question on buying stock directly from a company and bypassing a broker altogether, see Can I buy stocks directly from a public company?" |
Utilize your financial knowledge, give your answer or opinion to the input question or subject. | What can I take from learning that a company's directors are buying or selling shares? | "It is not clear when you mean ""company's directors"" are they also majority owners. There are several reasons for Buy; Similarly there are enough reasons for sell; Quite often the exact reasons for Buy or Sell are not known and hence blindly following that strategy is not useful. It can be one of the inputs to make a decision." |
Based on your financial expertise, provide your response or viewpoint on the given financial question or topic. | Is my stock gone forever from a reverse split / bought by another company? | GT BIOPHARMA, INC. ANNOUNCES REVERSE STOCK SPILT AS PART OF OXIS-GEORGETOWN PLANNED MERGER LOS ANGELES, CA / ACCESSWIRE / August 21, 2017 / GT Biopharma Inc. (formerly known as Oxis International, Inc.) announced today a 1-for-300 reverse stock split. Shareholders of GT Biopharma Inc. (OTCQB: OXIS and Euronext Paris: OXI.PA) will be issued 1 share of common stock for every 300 shares common stock that they owned. If you owned fewer than 300 shares, they cashed you out. |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | Is there any kind of unsecured stock loan? | buy an option, they cost less and let you buy shares in the future at the price you see now. only if you plan to buy more than 100 shares of the stock at that future date though. better learn how to use options strategically first, which I won't go into. but this is indeed their purpose. |
Offer your insights or judgment on the input financial query or topic using your financial expertise. | Are traders 100% responsible for a stock's price changes? | "Traders = every market participant. Not some shadow figure that excludes you just because you passively drop cash into a 401k Vanguard fund every paycheck. So yes, if everyone stopped trading then the price won't move. Trades are 100% responsible for the prices you see on charts and tickers. A stock won't be worth ""$100"" if nobody ever traded $100 for it. It only has that price now or in the past because somebody placed an order for it at $100 and somebody else filled that order at $100" |
Offer your insights or judgment on the input financial query or topic using your financial expertise. | Is the writer of a call ever required to surrender dividends to the call option buyer? | The dividend goes to he who owns the stock when it goes ex-div. A buyer (the call buyer who exercises) will not exercise unless the stock plus dividend are in the money. Otherwise they'd be buying the stock at a premium. I like the scenario your friend doesn't. If I can find a high dividend stock and sell the call for a decent price, I may get a great return on a stock that's gone down 5% over a year's time. If it goes up and called away, that's fine too, it means a profit. |
Utilize your financial knowledge, give your answer or opinion to the input question or subject. | Some stock's prices don't fluctuate widely - Is it an advantages? | Oracle specifically is paying a dividend with a current yield of about 1.4% annually and has appreciated nearly 50% over the last 5 years. Granted, the past doesn't guarantee the future but the company has paid a pretty steady dividend since 2009. If you're buying as part of an employee program you would presumably be holding the shares for a long time and the daily and even monthly movements aren't terribly relevant to a long term holding period. Additionally, you may be able to buy the shares at a discount to the market price as part of your employee program. You probably also won't pay any transaction fee. |
Share your insights or perspective on the financial matter presented in the input. | Capital Gains Tax with Multiple 'buy' Transactions per Stock (U.S.) | From 26 CFR 1.1012(c)(1)i): ... if a taxpayer sells or transfers shares of stock in a corporation that the taxpayer purchased or acquired on different dates or at different prices and the taxpayer does not adequately identify the lot from which the stock is sold or transferred, the stock sold or transferred is charged against the earliest lot the taxpayer purchased or acquired to determine the basis and holding period of the stock. From 26 CFR 1.1012(c)(3): (i) Where the stock is left in the custody of a broker or other agent, an adequate identification is made if— (a) At the time of the sale or transfer, the taxpayer specifies to such broker or other agent having custody of the stock the particular stock to be sold or transferred, and ... So if you don't specify, the first share bought (for $100) is the one sold, and you have a capital gain of $800. But you can specify to the broker if you would rather sell the stock bought later (and thus have a lower gain). This can either be done for the individual sale (no later than the settlement date of the trade), or via standing order: 26 CFR 1.1012(c)(8) ... A standing order or instruction for the specific identification of stock is treated as an adequate identification made at the time of sale, transfer, delivery, or distribution. |
Offer your insights or judgment on the input financial query or topic using your financial expertise. | Does an index have a currency? | From Wikipedia - To calculate the value of the S&P 500 Index, the sum of the adjusted market capitalization of all 500 stocks is divided by a factor, usually referred to as the Divisor. For example, if the total adjusted market cap of the 500 component stocks is US$13 trillion and the Divisor is set at 8.933 billion, then the S&P 500 Index value would be 1,455.28. From a strictly mathematical perspective, the divisor is not canceling out the units, and the S&P index is dollar denominated even though it's never quoted that way. A case in point is that the S&P is often said to have a P/E, and especially an E, the earnings attributed to one 'unit' of S&P. And if you buy a mutual fund sporting a low expense ratio, you can invest exactly that much money (the current S&P index value) and see the dividends accrue to your account, less the fee. |
Share your insights or perspective on the financial matter presented in the input. | Convention for adding ishares (ETFs) into personal accounts | What account you put it in depends on why you have those different accounts. First, if you have them due to regulatory requirements, then you of course must follow said regulations. I doubt that's the case here. Otherwise, you might be splitting based on how they trade (ETFs trade as stocks) or you could be splitting based on how you build a portfolio out of them. When you build a non-speculative stock portfolio, you typically want to limit your holdings in a single stock to a fairly small portion of your portfolio (say, 3%) to limit your exposure to bad stuff happening to a single company. That doesn't apply nearly a much to mutual funds, especially index funds. ETFs are much more like mutual funds here. You can also, of course, create an ETF account and put them there. You also say you have a market index account, what is that used for? |
Offer your insights or judgment on the input financial query or topic using your financial expertise. | Is engaging in stocks without researching unwise? | "If you don't want to do the deep research on each individual company, you might want to look at index funds and similar ""whole market"" investments." |
Based on your financial expertise, provide your response or viewpoint on the given financial question or topic. | Short-term robots and long-term investors in the stock market | Consider the price history to be the sum of short term movements and long term movements. If you hold a stock for a long time you will benefit (or lose) from its long term movement. If a sufficiently large and very good short term trader existed he would tend to reduce short term volatility, eventually to nearly zero. At that point, the price would rise gently over the course of the day in line with the long term variation in price. Presumably robot traders will increase the time horizon of their trades when they have exhausted the gains they can make from short term trades. |
Utilize your financial knowledge, give your answer or opinion to the input question or subject. | How did this day trader lose so much? | The day trader in the article was engaging in short selling. Short selling is a technique used to profit when a stock goes down. The investor borrows shares of a stock from someone else and sells them. After the stock price goes down, the investor buys the shares back and returns them, pocketing the difference. As the day trader in the article found out, it is a dangerous practice, because there is no limit to the amount of money you can lose. The stock was trading at $2, and the day trader thought the stock was going to go down to $1. He borrowed and sold 8,400 shares at $2. He hoped to buy them back at $1 and earn $8,400 profit. Instead, the stock went up a lot, and he was forced to buy back the shares at $18.50 per share, or about $155,400. He had had $37,000 with E-Trade, which they took, and he is now over $100,000 in debt. |
Share your insights or perspective on the financial matter presented in the input. | Benefits of Purchasing Company Stock at a Discount | Typically, the discount is taxable at sale time But what about taxes? When the company buys the shares for you, you do not owe any taxes. You are exercising your rights under the ESPP. You have bought some stock. So far so good. When you sell the stock, the discount that you received when you bought the stock is generally considered additional compensation to you, so you have to pay taxes on it as regular income. Source: Turbotax. Second source. Your pretax rate of return would be: 17% (100/85) In your scenario where the stock price is fixed at $100. Your tax rate would be your marginal rate. If the stock stayed at 100, you would still be taxed as income on $15/share (the discount) and would receive no benefit for holding the stock one year. Assuming you are in the 25% tax bracket, your after tax rate of return would be 13% ((15*.75)+85)/85) |
Utilize your financial knowledge, give your answer or opinion to the input question or subject. | Why companies appear in several stock exchanges? | "If I buy the one from NSY, is it the ""real"" Sinopec? No - you are buying an American Depository Receipt. Essentially some American bank or other entity holds a bunch of Sinopec stock and issues certificates to the American exchange that American investors can trade. This insulates the American investors from the cost of international transactions. The price of these ADRs should mimic the price of the underlying stock (including changes the currency exchange rate) otherwise an arbitrage opportunity would exist. Other than that, the main difference between holding the ADR and the actual stock is that ADRs do not have voting rights. So if that is not important to you then for all intents and purposes trading the ADR would be the same as trading the underlying stock." |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | Taxes on selling stock | You realise a capital gain as soon as you sell the stock. At that point, you will have to pay taxes on the profits when you fill in your tax return. The fact that you used the money to subsequently purchase other stocks is not relevant, unless you sell those stocks within the same tax year. For example, purchase $5000 of stock A in 2010. Sell for $6000 in 2010. Purchase $6000 of stock B in 2010. Sell stock B for $6500 in 2010. Purchase $6500 of stock C in 2010. Sell stock C for $7000 in 2011. You owe capital gains on ($6000 - $5000) + ($6500 - $6000) = $1500 for tax year 2010. You owe capital gains on ($7000 - $6500) = $500 for 2011. |
Utilize your financial knowledge, give your answer or opinion to the input question or subject. | Is it wise to sell company stock to pay down a mortgage? | "If by ""Company Stock"" you mean ""stock in the company I work for"" then absolutely sell your stock. It is too big a risk to have your investments tied into the same company that is also providing your salary. If you mean stock as in general investments, I like to look at it this way. If you have $25,000 stock and a $100,000 mortgage you ask this question: If I had a $75,000 mortgage would I borrow an additional $25,000 against my house to invest in the stock market? If the answer is yes, then you are taking a risk consistent with your tolerance for risk. If you answer no, then your tolerance for risk says you'd be happier paying down your mortgage." |
Share your insights or perspective on the financial matter presented in the input. | What is the difference between trading and non-trading stock? | Every company has Stocks. For the stocks to be traded via some stock exchange, the companies must follow the eligibility criteria and guidelines. Once done, these are then listed on the stock exchange and can be traded. The advantage [amongst others] of listing is liquidity and stocks can easily be bought and sold. Some small companies or closely held companies may not want to list on stock exchange and hence are not traded. This does not mean they can't be bought and sold, they can be outside of the market, however the deals are complex and every deal has to be worked out. During the course of time a stock that is traded on a stock exchange, would either fail to meet the criteria or voluntarily choose not to be traded and follow the delisting process [either by stock exchange or by company]. After this the stocks are no longer traded on the exchange. |
Share your insights or perspective on the financial matter presented in the input. | RSU taxation: when am I taxed, and how much? | Restricted Stock Units are different from stock options because instead of buying them at a particular strike price, you receive the actual shares of stock. They are taxed as ordinary income at the time that the restriction is lifted (you don't have to sell them to be taxed). Usually, you can choose to have a percentage of the stock withheld to cover tax withholding or pay for the withholding out of pocket (so you can retain all of your shares). |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | Why do deep in the money options trade below their intrinsic value? | You made 94$ on an investment of 554.80 *100 = 55480$ for an approx holding period of 1 year. So the % return is ~0.16%, which is not much better than the short term us treasury rate. The current 1 year treasury rate is 0.27%: http://ycharts.com/indicators/1_year_treasury_rate So yes, you have a risk free portfolio, so you make the risk free rate. Remember this is an European option, so you are stuck for 1 year. if you found the same mispricing in an American option, then you found an arbitrage. |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | How should I invest my money as a young graduate in Europe? | Using a simple investment calculator to get a sense of scale here, to have 70k total, including the 500 a month invested, after ten years you just need returns of 2%. To earn 70k on top of the money invested you would need returns over 20%. To do that in five years you would need over 50% annual return. That is quite a big difference. Annualized returns of 20% would require high risk and a very large amount of time invested, skill and luck. 2% returns can be nearly guaranteed without much effort. I would encourage you to think about your money more holistically. If you get very unlucky with investments and don't make any money will you not go on the vacations even if your income allows? That doesn't make a lot of sense. As always, spend all your money with the current and future in mind. Investment return Euros are no different from any other Euros. At that point, the advice is the same for all investors try to get as much return as possible for the risk you are comfortable with. You seem to have a high tolerance for risk. Generally, for investors with a high risk tolerance a broadly diversified portfolio of stocks (with maybe a small amount of bonds, other investments) will give the most return over the long term for the risk taken. After that generally the next most useful way to boost your returns is to try to avoid taxes which is why we talk about 401(k)s so much around here. Each European country has different tax law, but please ask questions here about your own country as well as you mention money.se could use more ex-US questions. |
Offer your insights or judgment on the input financial query or topic using your financial expertise. | How to deal with IRS response of no action to 83(b) election? | I think you should consult a professional with experience in 83(b) election and dealing with the problems associated with that. The cost of the mistake can be huge, and you better make sure everything is done properly. For starters, I would look at the copy of the letter you sent to verify that you didn't write the year wrong. I know you checked it twice, but check again. Tax advisers can call a dedicated IRS help line for practitioners where someone may be able to provide more information (with your power of attorney on file), and they can also request the copy of the original letter you've sent to verify it is correct. In any case, you must attach the copy of the letter you sent to your 2014 tax return (as this is a requirement for the election to be valid). |
Share your insights or perspective on the financial matter presented in the input. | Starting a new job. Help me with retirement/debt planning please! | I would go with your alternative idea: get rid of the debt as fast as possible. You have $32k of debt. It's a lot, but with your new $90k salary, do you think you could get rid of it all in 12 months? See if you can make that happen. Once the debt is gone, you'll be in a position to invest as much as you want and keep all your gains. You are worried about sacrificing future money in your investments, but if you eliminate the debt over the next year, this will be minimized. Just lose the debt. |
Utilize your financial knowledge, give your answer or opinion to the input question or subject. | Is it worth having a pension? | "Paying someone to look after your money always costs something - it doesn't matter whether you're inside a pension or not. Fees are highest for ""actively managed"" funds and lowest for passively managed funds or things where you choose the investments directly - but in the latter case you might pay out a lot in dealing fees. Typically pensions will have some small additional costs on top of that, but those are hugely outweighed by the tax advantages - payments into a pension are made from gross salary (subject to an annual limit), and growth inside the pension is tax free. You do pay income tax when you take the money out though - but by then your marginal tax rate may well have dropped. If you want to control your own investments within a pension you can do this, subject to choosing the right provider - you don't have to be invested in the stockmarket at all (my own pension isn't at the moment). I wrote an answer to another question a while ago which briefly summarises the options As far as an annuity goes, it's not as simple as the company taking the money you saved when you die. The point of an annuity is that you can't predict when you'll die. Simplifying massively, suppose the average life expectancy when you retire is 20 years and you have 100K saved, and ignore inflation and interest for now. Then on average you should have 5K/year available - but since you don't know when you'll die if you just spend your money at that rate you might run out after 20 years but still be alive needing money. Annuities provide a way of pooling that risk - in exchange for losing what's left if you die ""early"", you keep getting paid beyond what you put in if you die ""late"". Your suggestion of taking the dividends from an index tracker fund - or indeed the income from any other investment - is fine, but the income will be substantially less than an annuity bought with the same money because you won't be using up any capital, whereas an annuity implicitly does that. Depending on the type of investment, it might also be substantially more risky. Overall, you only need to secure the income you actually need/want to live on. Beyond that level, keeping your money outside the pension system makes some sense, though this might change with the new rules referred to in other answers that mean you don't have to buy an annuity if you have enough guaranteed income anyway. In any case, I strongly suggest you focus first on ensuring you have enough to live on in retirement before you worry about leaving an inheritance. As far as setting up a trust goes, you might be able to do that, but it would be quite expensive and the government tends to view trusts as tax avoidance schemes so you may well fall foul of future changes in the rules." |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | Further Understanding of Wash Sale Rules | Disallowed losses due to the wash sale rule are added to the basis of the repurchased shares. In your example, on day two you paid $0.70 per share. Then the disallowed $0.30 loss from the previous day gets added to the basis, making your total basis $1.00 per share. When you sell at the end of the day for $1.00 per share, your net gain/loss is zero. Furthermore, you can recapture disallowed losses by selling the last lot of ABC, completely divesting yourself of all holdings in ABC for at least 31 days. Even if that last lot was a loss, when taking into account the increased basis from previously disallowed wash sale losses, you can claim the loss fully on this last, non-wash sale. |
Utilize your financial knowledge, give your answer or opinion to the input question or subject. | How can cold-callers know about my general financial status | The cold caller is just a different way to contact you compared to the junk mail that they send. The business gets information from the credit rating companies for households that meet a specific set of criteria. It could be town, age, home ownership, low credit utilization...Or the exact opposite depending on what they are selling. Some business do sell your data. Grocery store know who buys certain products: parents buying diapers may want to start saving for college; ones buying acne medicine may want to talk about lower rates for car insurance. When they call via phone they have a different success rate compared to junk mail, but for that business that may be acceptable for their needs. |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | What is the best, low risk investment I can make now? | "TL;DR - go with something like Barry Ritholtz's All Century Portfolio: 20 percent total U.S stock market 5 percent U.S. REITs 5 percent U.S. small cap value 15 percent Pacific equities 15 percent European equities 10 percent U.S. TIPs 10 percent U.S. high yield corp bonds 20 percent U.S. total bond UK property market are absurdly high and will be crashing a lot very soon The price to rent ratio is certainly very high in the UK. According to this article, it takes 48 years of rent to pay for the same apartment in London. That sounds like a terrible deal to me. I have no idea about where prices will go in the future, but I wouldn't voluntarily buy in that market. I'm hesitant to invest in stocks for the fear of losing everything A stock index fund is a collection of stocks. For example the S&P 500 index fund is a collection of the largest 500 US public companies (Apple, Google, Shell, Ford, etc.). If you buy the S&P 500 index, the 500 largest US companies would have to go bankrupt for you to ""lose everything"" - there would have to be a zombie apocalypse. He's trying to get me to invest in Gold and Silver (but mostly silver), but I neither know anything about gold or silver, nor know anyone who takes this approach. This is what Jeremy Siegel said about gold in late 2013: ""I’m not enthusiastic about gold because I think gold is priced for either hyperinflation or the end of the world."" Barry Ritholtz also speaks much wisdom about gold. In short, don't buy it and stop listening to your friend. Is buying a property now with the intention of selling it in a couple of years for profit (and repeat until I have substantial amount to invest in something big) a bad idea? If the home price does not appreciate, will this approach save you or lose you money? In other words, would it be profitable to substitute your rent payment for a mortgage payment? If not, you will be speculating, not investing. Here's an articles that discusses the difference between speculating and investing. I don't recommend speculating." |
Share your insights or perspective on the financial matter presented in the input. | Why would a company have 2 listings on the same exchange? | A company can issue different kinds of shares. For example, some kinds of shares may get preference in dividends or payment in event of (company) bankruptcy. Preferred shares are an example of this. A company might have several kinds of preferred shares and a 'common stock'. Here is a good explanation. See too the Wikipedia article about preferred stock. Toronto-Dominion Bank (TD) is an example of a company that has fourteen different preferred share issues, each with its own listing on the Toronto Stock Exchange (TSE) and symbol. TD has one kind of common stock, which is also listed on the TSE. However, TD common equity trades much more actively than the preferred shares. Remember that preferred stock is a different security type than common stock e.g. common has voting rights, preferred does not. |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | What could cause a stock to trade below book value? | A company's stock value is indicative of the market's collective belief of the future of the company. The relationship of between price and book value will vary according to the quality of the company, the category of stock, etc. In extreme cases, say Bank of America, the stock trades at a fraction of book, because BOA's books are a fantasy by most people's reckoning. |
Share your insights or perspective on the financial matter presented in the input. | What if I sell an stock that is going to give an stock dividend after the ex-date but before the payable date | I know that in the case of cash dividends I will get the dividend as long as I bought the stock before the ex-date but what happens in the case of an stock dividend? This is same as cash dividends. You would receive the additional stock. |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | Why and why would/wouldn't a company split their stock? | From Investopedia, A stock split is usually done by companies that have seen their share price increase to levels that are either too high or are beyond the price levels of similar companies in their sector. The primary motive is to make shares seem more affordable to small investors even though the underlying value of the company has not changed. From Wikipedia, It is often claimed that stock splits, in and of themselves, lead to higher stock prices; research, however, does not bear this out. What is true is that stock splits are usually initiated after a large run up in share price...stock splits do increase the liquidity of a stock; there are more buyers and sellers for 10 shares at $10 than 1 share at $100. Some companies have the opposite strategy: by refusing to split the stock and keeping the price high, they reduce trading volume. Berkshire Hathaway is a notable example of this. Something more to munch on, Why Warren Buffett Is Against Stock Splits. |
Offer your insights or judgment on the input financial query or topic using your financial expertise. | Calculating Future and Present value into mortgage comparisons | Keep in mind the number of months or years before you break even. You pay money to lower the interest rate, and lower the monthly cost. But it takes a number of months, using your numbers $7,000 to save $160 a month will take ~43 months. That is before figuring in the future or present value. If you sell or refinance the mortgage, the initial points to lower the rate is gone. |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | Quote driven and order driven financial markets | "- In a quote driven market, must every investor trade with a market maker? In other words, two parties that are both not market makers cannot trade between themselves directly? In a way yes, all trades go through a market maker but those trades can be orders put in place by a ""person"" IE: you, or me. - Does a quote driven market only display the ""best"" bid and ask prices proposed by the market makers? In other words, only the highest bid price among all the market makers is displayed, and other lower bid prices by other market makers are not? Similarly, only the lowest ask price over all market makers is displayed, and other higher ask prices by other market makers are not? No, you can see other lower bid and higher ask prices. - In a order-driven market, is it meaningful to talk about ""the current stock price"", which is the price of last transaction? Well that's kind of an opinion. Information is information so it won't be bad to know it. Personally I would say the bid and ask price is more important. However in the real world these prices are changing constantly and quickly so realistically it is easier to keep track of the quote price and most likely the bid/ask spread is small and the quote will fall in between. The less liquid a security is the more important the bid/ask is. -- This goes for all market types. - For a specific asset, will there be several transactions happened at the same time but with different prices? Today with electronic markets, trades can happen so quickly it's difficult to say. In the US stock market trades happen one at a time but there is no set time limit between each trade. So within 1 second you can have a trade be $50 or $50.04. However it will only go to $50.04 when the lower ask prices have been exhausted. - Does an order driven market have market makers? By definition, no. - What are some examples of quote driven and order driven financial markets, in which investors are commonly trading stocks and derivatives, especially in U.S.? Quote driven market: Bond market, Forex. Order driven market: NYSE comes from an order driven market but now would be better classified as a ""hybird market"" Conclusion: If you are asking in order to better understand today's stock markets then these old definitions of Quote market or Order market may not work. The big markets in the real world are neither. (IE: Nasdaq, NYSE...) The NYSE and Nasdaq are better classified as a ""hybird market"" as they use more then a single tactic from both market types to insure market liquidity, and transparency. Markets these days are strongly electronic, fast, and fairly liquid in most cases. Here are some resources to better understand these markets: An Introduction To Securities Markets The NYSE And Nasdaq: How They Work Understanding Order Execution" |
Offer your insights or judgment on the input financial query or topic using your financial expertise. | Filing taxes on stocks | Generally stock trades will require an additional Capital Gains and Losses form included with a 1040, known as Schedule D (summary) and Schedule D-1 (itemized). That year I believe the maximum declarable Capital loss was $3000--the rest could carry over to future years. The purchase date/year only matters insofar as to rank the lot as short term or long term(a position held 365 days or longer), short term typically but depends on actual asset taxed then at 25%, long term 15%. The year a position was closed(eg. sold) tells you which year's filing it belongs in. The tiny $16.08 interest earned probably goes into Schedule B, typically a short form. The IRS actually has a hotline 800-829-1040 (Individuals) for quick questions such as advising which previous-year filing forms they'd expect from you. Be sure to explain the custodial situation and that it all recently came to your awareness etc. Disclaimer: I am no specialist. You'd need to verify everything I wrote; it was just from personal experience with the IRS and taxes. |
Offer your insights or judgment on the input financial query or topic using your financial expertise. | question about early exercise of a NQSO | Now assume these shares are vested, held for at least 1 year, and are then sold for $5 each. Everything I've read implies that the grantee now owes long-term capital gains taxes on the difference, which would be 10k * ($5 - $1). No. That's exactly what the SO is NQ for. Read more on the differences between ISO and NQSO here. Now assume these shares are vested, held for at least 1 year, and are then sold for $5 each. Everything I've read implies that the grantee now owes long-term capital gains taxes on the difference, which would be 10k * ($5 - $1). At this point you no longer have NQSO, you have RSU. If you filed 83(b) when you exercised, then you pay capital gains tax when they vest. If you didn't - its ordinary income to you. NQSO is a red herring here since once exercised they no longer exist. If you didn't file 83(b), then when the stock vests the difference between the FMV at vest and the money you spent on it when exercising (if any) is considered wages and taxed as ordinary income (+FICA etc). From that point the RSU becomes a regular stock investment and the capital gains clock starts ticking. |
Utilize your financial knowledge, give your answer or opinion to the input question or subject. | How to dollar-cost-average with a large amount of money in a savings account? | DCA is not 10%/day over 10 days. If I read the objective correctly, I'd suggest about a 5 year plan. It's difficult to avoid the issue of market timing. And any observation I'd make about the relative valuation of the market would be opinion. By this I mean, some are saying that PE/10 which Nobel prize winner Robert Schiller made well known, if not popular, shows we are pretty high. Others are suggesting the current PE is appropriate given the near zero rate of borrowing. Your income puts long term gains at zero under current tax code. Short term are at your marginal rate. I would caution not to let the tax tail wag the investing dog. The fellow that makes too many buy/sell decisions based on his taxes is likely to lag he who followed his overall allocation goals. |
Share your insights or perspective on the financial matter presented in the input. | Dividend yeild per unit | "$36 dividend/900 DJIA = 4% 5.5% bond yield = ($36 dividend/660 DJIA) Graham wrote this at a very different time in financial markets- interest rates were much higher, and the DJIA much lower. In addition, bonds were yielding more than stocks, unlike today when the DJIA % the 10yr Treasury yield 2.63% and 2.13% respectively. In addition, his ""weigher of the odds"" suggests waiting to invest until equity prices are lower (usually dividends aren't reduced), and therefore the DJIA dividend yield would rise relative to bond yields." |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | Intro to Investment options for a Canadian | "I got started by reading the following two books: You could probably get by with just the first of those two. I haven't been a big fan of the ""for dummies"" series in the past, but I found both of these were quite good, particularly for people who have little understanding of investing. I also rather like the site, Canadian Couch Potato. That has a wealth of information on passive investing using mutual funds and ETFs. It's a good next step after reading one or the other of the books above. In your specific case, you are investing for the fairly short term and your tolerance for risk seems to be quite low. Gold is a high-risk investment, and in my opinion is ill-suited to your investment goals. I'd say you are looking at a money market account (very low risk, low return) such as e.g. the TD Canadian Money Market fund (TDB164). You may also want to take a look at e.g. the TD Canadian Bond Index (TDB909) which is only slightly higher risk. However, for someone just starting out and without a whack of knowledge, I rather like pointing people at the ING Direct Streetwise Funds. They offer three options, balancing risk vs reward. You can fill in their online fund selector and it'll point you in the right direction. You can pay less by buying individual stock and bond funds through your bank (following e.g. one of the Canadian Couch Potato's model portfolios), but ING Direct makes things nice and simple, and is a good option for people who don't care to spend a lot of time on this. Note that I am not a financial adviser, and I have only a limited understanding of your needs. You may want to consult one, though you'll want to be careful when doing so to avoid just talking to a salesperson. Also, note that I am biased toward passive index investing. Other people may recommend that you invest in gold or real estate or specific stocks. I think that's a bad idea and believe I have the science to back this up, but I may be wrong." |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | Is an investor of a startup subjected under a vesting schedule? | "Recently, I asked about what the company valuation is and how many shares does my 4% represent.CFO told me that there is no point to talk about ""shares"" or ""stock"" since the company is not public. Is it right? No, it is wrong. Shares and stocks exist regardless of how they can be traded. Once a company is formed, there are stocks that belong to the owners in the proportion of the ownership. They may not exist physically, but they do exist on paper. As an owner of 5% of the company, you own 5% of the company stocks. I asked if my investor portion equity will be subjected under a vesting schedule, CFO said yes. That doesn't make sense to me, because I bought those 4%? Aren't those supposed to be fully vested? I agree to my employee equity to be vested. Doesn't make sense to me either, since your money is already in their pocket. But I'm not sure if its illegal. If that's what is written in the signed contract - then may be its possible to have that situation. But it doesn't make much sense, because these shares are granted to you in return to your money, not some potential future work (as the 1% employee's portion). You already gave the money, so why wouldn't they be vested? Best to read the contract upon which you gave them your money, I really hope you have at least that and not just gave them a check...." |
Based on your financial expertise, provide your response or viewpoint on the given financial question or topic. | How do freight derivatives like Forward Freight Agreements (FFAs) work? | The product descriptions for FFA swaps and options can be found here: http://www.lchclearnet.com/freight/ffas/products.asp The index (e.g. the BFA) is based on the settlement prices of the P2, P2A, and C4 contracts and the panamax TC routes. As such it's just a performance index and replicates the returns you'd get from holding a portfolio of the constituents. I think from the clearing descriptions everything should be clear. The wording in the link on the Baltic Exchange website is a bit nebulous. I think they mean standardised instead of specified. Because that's what sets the FFABA apart from OTC agreements or OTC spot markets. Edit: For more information on financial instruments in general see the Handbook of Financial Instuments. I haven't got the latest edition but I doubt he will mention FFAs, CFSAs, or anything that's specific to maritime markets but after all they're just plain forward agreements over a not-so-common underlying. |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | Plan/education for someone desiring to achieve financial independence primarily through investing? | Stay in school, learn everything you can, and spend as little money as possible. And realize that the chances of you dropping out and becoming a millionaire are much lower than the chances of you staying in school and becoming a millionaire. You're unlikely to be a good investor if you make bets with negative expected payoffs. |
Share your insights or perspective on the financial matter presented in the input. | Some U.S. Tax Questions (CPA Concerns) | He has included this on Schedule D line 1a, but I don't see any details on the actual transaction. It is reported on form 8949. However, if it is fully reported in 1099-B (with cost basis), then you don't have to actually detail every position. Turbotax asked me to fill in individual stock sales with proceeds and cost basis information. ... Again, it seems to be documented on Schedule D in boxes 1a and 8a. See above. I received a 1099-Q for a 529 distribution for a family member. It was used for qualified expenses, so should not be taxable. Then there's nothing to report. I believe I paid the correct amounts based on my (possibly flawed) understanding of estimated taxes. His initial draft had me paying a penalty. I explained my situation for the year, and his next draft had the penalties removed, with no documentation or explanation. IRS assesses the penalty. If you volunteer to pay the penalty, you can calculate it yourself and pay with the taxes due. Otherwise - leave it to the IRS to calculate and assess the penalty they deem right and send you a bill. You can then argue with the IRS about that assessment. Many times they don't even bother, if the amounts are small, so I'd suggest going with what the CPA did. |
Share your insights or perspective on the financial matter presented in the input. | Why would a long-term investor ever chose a Mutual Fund over an ETF? | First, it's not always the case that ETFs have lower expenses than the equivalent mutual funds. For example, in the Vanguard family of funds the expense ratio for the ETF version is the same as it is for the Admiral share class in the mutual fund version. With that in mind, the main advantages of a mutual fund over an equivalent ETF are: From a long-term investor's point of view, the main disadvantage of mutual funds relative to ETFs is the minimum account sizes. Especially if the fund has multiple share classes (i.e., where better classes get lower expense ratios), you might have to have quite a lot of money invested in the fund in order to get the same expense ratio as the ETF. There are some other differences that matter to more active investors (e.g., intraday trading, options, etc.), but for a passive investor the ones above are the major ones. Apart from those mutual funds and ETFs are pretty similar. Personally, I prefer mutual funds because I'm at a point where the fund minimums aren't really an issue, and I don't want to deal with the more fiddly aspects of ETFs. For investors just starting out the lower minimum investment for an ETF is a big win, as long as you can get commission-free trades (which is what I've assumed above.) |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | Can I take money from my employee stock and put it towards another stock? | The question is for your HR department, or administrator of the plan. How long must you hold the employee shares before you are permitted to sell? Loyalty to your company is one thing, but after a time, you will be too heavily invested in one company, and you need to diversify out. One can cite any number they wish, 5%, 10%. All I know is that when Enron blew up, it only added insult to injury that not only did these people lose their job, they lost a huge chunk of their savings as well. |
Offer your insights or judgment on the input financial query or topic using your financial expertise. | Stock exchanges open on Saturday | According to Wikipedia as well as this stock market trading-hours website, the Tehran Stock Exchange is open Saturday through Wednesday. |
Based on your financial expertise, provide your response or viewpoint on the given financial question or topic. | What is the correct way to report incentive stock options (ISO) on federal taxes? | I'm assuming this was a cashless exercise because you had income show up on your w-2. When I had a similar situation, I did the following: If you made $50,000 in salary and $10,000 in stock options then your W-2 now says $60,000. You'll record that on your taxes just like it was regular income. You'll also get a form that talks about your stock sale. But remember, you bought and sold the stock within seconds. Your forms will probably look like this: Bought stock: $10,000 Sold stock: $10,000 + $50 commission Total profit (loss): ($50) From the Turbotax/IRS view point, you lost $50 on the sale of the stock because you paid the commission, but the buy and sell prices were identical or nearly identical. |
Share your insights or perspective on the financial matter presented in the input. | Why have I never seen a stock split? | Are you sure you're not just looking at prices that are adjusted for the split, e.g. Yahoo? For example, Gilead Sciences (GILD) split a few months ago, but if you look at a price chart, there isn't an interruption even though the split is clearly marked. (Look in the past six months; it split in January). However, you could also simply be watching companies that happen to not split, for a variety of reasons. This isn't a criticism, but rather just a consequence of whatever stocks you happen to be watching. However, a quick search for information on stock splits yields a few articles (mainly from the Motley Fool) that argue that fewer companies are performing stock splits in recent years; the articles mainly talk about tech companies, and they make the argument that even though the shares in Google and Apple have a high stock price: Google and Apple aren't all that expensive by traditional valuation metrics. Google trades at just 15 times next year's projected profitability. Apple fetches a mere 13 times fiscal 2012's bottom-line estimates. These articles are a bit dated in terms of the stock prices, but the rationale is probably still good. Similar logic could apply for other companies; for example, since May 2009, Panera's stock price has climbed by almost a factor of 4 without splitting. The articles also make the point that stock splits were traditionally seen as bullish signs because: Companies splitting to bring their share prices back down to more accessible levels were optimistic in building those sand castles back up. One could make a fair argument that the overall economic climate isn't as bullish as it used to be, although I would only be convinced that this was affecting stock splits if data could be gathered and tested. A stock split can also raise the price of a stock because if small investors feel the stock is suddenly more accessible to them, they purchase more of it and might therefore drive up the price. (See the Investopedia article on stock splits for more information). Companies might not see the necessity in doing this because their stock price isn't high enough to warrant a split or because the price isn't high enough to outprice smaller investors. One interesting point to make, however, is that even though stock splits can drive small investors to buy more of the stock, this isn't always a gain for the company because professional investors (firms, institutions, etc.) have a tendency to sell after a split. The paper is a bit old, but it's still a very neat read. It's possible that more and more companies no longer see any advantage to splitting because it might not affect their stock price in the long run, and arguably could even hurt it. Considering that large/professional investors likely hold a higher percentage of a company's shares than smaller investors, if a stock split triggers a wave of selling by the former, the increasing propensity to buy of the latter may not be enough to offset the decline in price. Note: My answer only refers to standard stock splits; the reasons above may not apply to a decrease in the number of reverse stock splits (which may not be a phenomenon; I don't know). |
Based on your financial expertise, provide your response or viewpoint on the given financial question or topic. | Why does selling and then rebuying stock not lead to free money? | You are misunderstanding what makes the price of a stock go up and down. Every time you sell a share of a stock, there is someone else that buys the stock. So it is not accurate to say that stock prices go down when large amounts of the stock are sold, and up when large amounts of the stock are bought. Every day, the amount of shares of a stock that are bought and sold are equal to each other, because in order to sell a share of stock, someone has to buy it. Let me try to explain what actually happens to the price of a stock when you want to sell it. Let's say that a particular stock is listed on the ticker at $100 a share currently. All this means is that the last transaction that took place was for $100; someone sold their share to a buyer for $100. Now let's say that you have a share of the stock you'd like to sell. You are hoping to get $100 for your share. There are 2 other people that also have a share that they want to sell. However, there is only 1 person that wants to buy a share of stock, and he only wants to pay $99 for a share. If none of you wants to sell lower than $100, then no shares get sold. But if one of you agrees to sell at $99, then the sale takes place. The ticker value of the stock is now $99 instead of $100. Now let's say that there are 3 new people that have decided they want to buy a share of the stock. They'd like to buy at $99, but you and the other person left with a share want to sell at $100. Either one of the sellers will come down to $99 or one of the buyers will go up to $100. This process will continue until everyone that wants to sell a share has sold, and everyone who wants to buy a share has bought. In general, though, when there are more people that want to sell than buy, the price goes down, and when there are more people that want to buy than sell, the price goes up. To answer your question, if your selling of the stock had caused the price to go down, it means that you would have gotten less money for your stock than if it had not gone down. Likewise, if your buying the stock had caused it to go up, it just means that it would have cost you more to buy the stock. It is just as likely that you would lose money doing this, rather than gain money. |
Based on your financial expertise, provide your response or viewpoint on the given financial question or topic. | Buying International Stock | For example, if the Dow, S&P 500, NASDAQ are all down does that necessarily mean the Canadian stock will get negatively impacted? Or is it primarily impacted by the Canadian market? The TWMJF stock makes up a very small part of the Canadian market so it affects the overall market, but this doesn't mean that the overall market affects this stock. So then the answer is: no, the TWMJF stock price will not necessarily follow either US or Canadian market indexes. However, there can be major events which can affect the markets, including the stocks which make up the markets. TWMJF will probably be more sensitive to Canadian events than US events. |
Share your insights or perspective on the financial matter presented in the input. | Why is a stock trade flat on large volume? | Large volume just means a lot of market participants believe they know where the stock price will be (after some amount of time). The fact that the price is not moving just means that about 50% of those really confident traders think the stock will be moving up, and about 50% of those really confident traders think the stock will be moving down. |
Offer your insights or judgment on the input financial query or topic using your financial expertise. | How to reconcile performance with dividends? | You didn't identify the fund but here is the most obvious way: Some of the stocks they owned could had dividends. Therefore they would have had to pass them on to the investors. If the fund sold shares of stocks, they could have capital gains. They would have sold stocks to pay investors who sold shares. They also could have sold shares of stock to lock in gains, or to get out of positions they no longer wanted. Therefore a fund could have dividends, and capital gains, but not have an increase in value for the year. Some investors look at how tax efficient a fund is, before investing. |
Offer your insights or judgment on the input financial query or topic using your financial expertise. | Can you short a stock before the ex-div. date to make a profit? | When you short a stock and the stock goes ex-div. you have to pay out an amount equal to the dividend. So in your example, GG would short the stock at $10.00, buy back at $9.00 and be charged $1.00 for the dividend. Net effect $0.00. |
Share your insights or perspective on the financial matter presented in the input. | Investing in the stock market during periods of high inflation | The relation between inflation and stock (or economic) performance is not well-understood. Decades ago, economists thought inflation corresponded with periods of high growth and good real returns, but since then we have had periods of low inflation and high growth and high inflation with low growth. It is generally understood among current economists that inflation levels (especially expected inflation) are neither indicative nor causative of real stock returns. Many things can affect inflation, and economic performance is only a minor one. Many things can cause economic performance, and inflation is only a minor one. It's not clear whether the overall relation between inflation and real stock returns is positive or negative. Notice, however, that in principle stock returns are real. That is, the money companies make is in inflated dollars so profit and dividends for a company whose prospects have not changed should go up and down at the same rate as inflation. This would mean if inflation goes up by 5% and nothing else changes, you would expect stock prices to go up by the same proportion so you wouldn't have strong feelings about inflation one way or the other. In real life stock prices will go up by either more or less than 5% but I'm not comfortable saying which, on average. Bottom line: current levels of inflation can't really be used to predict real stock returns, so you shouldn't let current inflation guide your decision about whether to buy stock. |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | Deciding between Employee Stock Option and Restricted Stock | There's no best strategy. Options are just pieces of paper, and if the stock price goes below the strike price - they're worthless. Stocks are actual ownership share, whatever the price is - that's what they're worth. So unless you expect the company stock prices to sky-rocket soon, RSU will probably provide better value. You need to do some math and decide whether in your opinion the stock growth in the next few years justifies betting on ESOP. You didn't say what country you're from, but keep in mind that stock options and RSUs are taxed differently and that can affect your end result as well. |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | Where can I buy preferred stocks as opposed to common stocks? | Preferred stock is traded on the market, so you can just buy it like any other. The symbol for a preferred stock is the ticker symbol followed by a dash and a letter for each class of preferred stock. Examples: Generally speaking, you should buy Preferred stock with the intention of holding onto it for at least a couple of years. Often preferred shares are lightly traded and have wide spreads that made it difficult to make money in the short term. |
Based on your financial expertise, provide your response or viewpoint on the given financial question or topic. | How Is the Price of a Stock Determined? [duplicate] | "The market price of a stock is based on nothing at all more than what two parties were last willing to transact for it. The stock has a ""bid"" and an ""ask"" each is the value placed by a counterparty. For the sale to occur, one party must meet the other. The stock transacts and that is the price. For a stock to ""go up"" people must be willing to pay more for it. Likewise, for it to ""go down"" people must be willing to accept less for it." |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | Why is volatility in a positive direction clubbed in the same risk category as volatility in a negative direction? | Mostly, when an equity's price rises, its statistical and implied volatilities fall and vice versa. The reason why is a mathematical phenomenon mixed with the reality that a unceasingly falling asset price will soon not exist, skewing the results with survivorship bias. Since volatility is standard deviation of price indexes, a security that changes in price by the same amount every day will have lower volatility, so a rising price will have lower implied volatility because its mostly experiencing positive daily price change while a recently falling price will have higher volatility because factored together with the positive price changes, the negative price changes will widen the standard deviation of the securities price index. Quantitatively, any change, in or out of one's favor, is a risk because change is uncertain, and any uncertainty is a risk. This quantitative interpretation while valid runs almost totally counter to the value opinion, that a lower price relative to value is a lower risk than a higher price relative to value, but both have their place in time. Over long time periods, it's best to use the value interpretation, quantitative for shorter. Using the opposite has hastily destroyed many a fund manager. |
Based on your financial expertise, provide your response or viewpoint on the given financial question or topic. | how stock market sale work? | As stock prices have declined, the net worth of people has come down. Imagine owning a million shares of a stock worth $100/share. This is worth $100,000,000. Now, if the stock is suddenly trading at $50/share then some would say you have lost $50,000,000. The value of the stock is less. The uncertainty is always there as there are differences between one day's close and another day's open possibly. The sale price is likely to be near the last trade is what is being used here. If you place a market order to sell your stock, the price may move between the time the order is placed and when it is filled. There are limit orders that could be used if you want to control the minimum price you get though you give up that the order has to be filled as otherwise people could try to sell shares for millions of dollars that wouldn't work out well. |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | How much do big firms and investors affect the stock market? | "It's not either or. Much of the time the value of the stock has some tangible relation to the financial prospects of the company. The value of Ford and GM stock rose when they were selling a lot of cars, and collapsed when their cars became unpopular. Other companies (Enron for example) frankly 'cook the books' to make it appear they are prospering, when they are actually drowning in debt and non-performing assets. So called ""penny stocks"" have both low prices and low volumes and are susceptible to ""pump and dump"" schemes, where a manipulator buys a bunch of the stock, touts the stock to the world, pointing to the recent increase in price. They then sell out to all the new buyers, and the price collapses. If you are going to invest in the stock market it's up to you to figure out which companies are which." |
Offer your insights or judgment on the input financial query or topic using your financial expertise. | Understanding a Trailing Limit if Touched Order | I don't think user4358's explanation is correct. A trailing LIT Sell Order adjusts downwards, i.e. if you place the order with an Aux price (in TWS it's trigger price) of 105.00 and a trailing amount of 6.00 then, assuming the ask is 100.00, TWS will add the trailing amount to the ask price and if it's less than the trigger price it will adjust. So in my example, if the market (ask) goes straight up to 105.00, nothing will be adjusted, the trigger is touched and the limit order will be placed (see below). If on the the other hand the market goes down to 99.00 then trlng amt + ask is 105.00, if it goes further down to 98.00 then the trigger price will be adjusted to 104.00 (because it's less than the current trigger), and so on. For the LIT part you have either an absolute limit price you can enter, or you have an offset limit which will be subtracted from the trigger price, in which case it is adjusted as well. So back to my example, the trigger is now 104.00 and the limit offset is say 1.00, so my limit order would be placed at 103.00 if the ask ever touches 104.00, and that in turn is only visible if the bid touches 103.00 (because it's limit-if-touched). For a buy just use the same explanation with some swapped roles, the trigger price adjust upwards when the trailing amount plus bid is larger than the current trigger, and the limit offset will be added to the trigger price. Edit Also quite succinct and worth having a look at: http://www.interactivebrokers.com/en/trading/orders/trailingLimitTouched.php Guesswork, highly subjective As for why this might be good, well, you have to believe in momentum strategies, i.e. a market that goes down, will continue to go down, if you believe that and you believe in mean reversion as well, then a trailing limit order can assist you in not buying/selling impulsively, but closer to the mean. I've never used it that way though. What I have done, even just now to get the explanation right, is to place trailing buy and sell orders simultaneously. You will find that you can just go in with coarse estimates and because the adjustments will go towards each other, you will end up with a narrowing band of trigger prices (as opposed to trailing stop orders which will give you a widening band of trigger prices). If you believe in overshooting and equilibria then this can be one easy way to profit from it. I've just sold EURUSD for 1.26420 and bought it back at 1.26380 with a trailing amount of 5pips and a limit offset of 2pips within the time of writing this. |
Offer your insights or judgment on the input financial query or topic using your financial expertise. | Where does the stock go in a collapse? | Just before a crash or at the start of the crash most of the smart money would have gotten out, the remaining technical traders would be out by the time the market has dropped 10 to 15%, and some of them would be shorting their positions by now. Most long-term buy and hold investors would stick to their guns and stay in for the long haul. Some will start to get nervous and have sleepless nights when the markets have fallen 30%+ and look to get out as well. Others stay in until they cannot stand it anymore. And some will stick it out throughout the downturn. So who are the buyers at this stage? Some are the so called bargain hunters that buy when the market has fallen over 30% (only to sell again when it falls another 20%), or maybe buy more (because they think they are dollar cost averaging and will make a packet when the price goes back up - if and when it does). Some are those with stops covering their short positions, whilst others may be fund managers and individuals looking to rebalance their portfolios. What you have to remember during both an uptrend and a downtrend the price does not move straight up or straight down. If we take the downtrend for instance, it will have lower lows and lower highs (that is the definition of a downtrend). See the chart below of the S&P 500 during the GFC falls. As you can see just before it really started falling in Jan 08 there was ample opportunity for the smart money and the technical traders to get out of the market as the price drops below the 200 MA and it fails to make a higher peak. As the price falls from Jan 08 to Mar 08 you suddenly start getting some movement upwards. This is the bargain hunters who come into the market thinking the price is a bargain compared to 3 months ago, so they start buying and pushing the price up somewhat for a couple of months before it starts falling again. The reason it falls again is because the people who wanted to sell at the start of the year missed the boat, so are taking the opportunity to sell now that the prices have increased a bit. So you get this battle between the buyers (bulls) and seller (bears), and of course the bears are winning during this downtrend. That is why you see more sharper falls between Aug to Oct 08, and it continues until the lows of Mar 09. In short it has got to do with the phycology of the markets and how people's emotions can make them buy and/or sell at the wrong times. |
Offer your insights or judgment on the input financial query or topic using your financial expertise. | Which type of stock order would I use to sell a stock that hits a price or drops below it? | A trailing stop will sell X shares at some percentage below the current market price. Putting in this order with a 10% trailing stop when the stock price is $50 will sell the stock when it hits $45. It's a market order at that point (see below). A stop order will sell the stock when it reaches a certain price. The stop order becomes a market order when the magic price is hit. This means that you may not sell it at or below your price when the order is executed. But the stock will sell faster because the trader must execute. A stop limit order is the same as a stop order, except the stock won't be sold if it can't be gotten for the price. As a result, the sell may not be executed. More information here. |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | Company stock listed in multiple exchanges? | If a company's shares trade in multiple exchanges, the prices in every exchange are very near to each other, otherwise you could earn money by doing arbitrage deals (buying in one, selling in the other) - and people do that once it becomes worth it. Which stock exchange you use is more a convenience for the buyer/seller - many investment banks offer only something local/near, and you have to go to specific investment banks to use other exchanges. For example, in Germany, it is easy to deal in Frankfurt, but if you want to trade at the the NASDAQ, you have to run around and find a bank that offers it, and you probably have to pay extra for it. In the USA, most investment banks offer NASDAQ, but if you want to trade in Frankfurt, you will have run around for an international company that offers that. As a stock owner/buyer, you can sell/buy your shares on any stock exchange where the company is listed (again, assuming your investment broker supports it). So you can buy in Frankfurt and sell in Tokyo seconds later, as nothing needs to be physically moved. Companies that are listed in multiple stock exchangs are typically large, and offer this to make trading their shares easier for a larger part of the world. Considering your 'theoretical buy all shares' - the shares are not located in the exchanges, they are in the hands of the owners, and not all are for sale, for various reasons. The owners decide if and when they want them offered for sale, and they also decide which stock exchange they offer them on; so you would need to go to all exchanges to buy them all. However, if you raise your offer price in one exchange only slightly, someone will see the arbitrage and buy them in the other locations and offer them to you in your stock exchange; in other words, for a small fee the shares will come to you. But again, most shares are typically not for sale. It's the same as trying to buy all Chevy Tahoes - even if you had the money, most owners wouldn't know or care about you. You would have to go around and contact every single one and convince them to sell. |
Based on your financial expertise, provide your response or viewpoint on the given financial question or topic. | Do corporate stock splits negate share repurchase programs? | No, I think you are misunderstanding the Math. Stock splits are a way to control relatively where the price per share can be for a company as companies can split or reverse split shares which would be similar to taking dimes and giving 2 nickels for each dime, each is 10 cents but the number of coins has varied. This doesn't create any additional value since it is still 10 cents whether it is 1 dime or 2 nickels. Share repurchase programs though are done to prevent dilution as executives and those with incentive-stock options may get shares in the company that increase the number of outstanding shares that would be something to note. |
Based on your financial expertise, provide your response or viewpoint on the given financial question or topic. | Can you buy out a pink sheet listed company by purchasing all of the oustanding shares? | Depends on the structure of the company and what shares are outstanding. If the pink sheet stock has no voting power then buying all that stock doesn't get you any control at all. On the other hand, if the outstanding shares only represent 20% of the company's overall shares, then buying all the shares isn't likely enough to have a controlling interest. Thus, you'll have to dig into the details. If you want an example of where I'd have my doubts, look at Nestle's stock which has the ticker of NSRGY. There can be companies that are structured with stock on multiple exchanges that can also be a challenge at times. There is also something to be said if you own enough stock in a company that this has to be disclosed to the SEC when you buy more. |
Offer your insights or judgment on the input financial query or topic using your financial expertise. | When a stock price goes down, does the money just disappears into thin air? | Yes and no. There is no actual money involved - just assumed value. Imagine you own a picture that you painted yourself, and all your friends agree it is worth 1000 $. You feel like you have a 1000 $-picture. Now a guy with some more knowledge visits you, and tells you that it is really only worth about a 100 $. Did you just lose 900 $? If yes, where did the money go? |
Offer your insights or judgment on the input financial query or topic using your financial expertise. | Execute or trade an options contract? | Your math shows that you bought an 'at the money' option for .35 and when the stock is $1 above the strike, your $35 (options trade as a contract for 100 shares) is now worth $100. You knew this, just spelling it out for future readers. 1 - Yes 2 - An execute/sell may not be nesesary, the ooption will have time value right until expiration, and most ofter the bid/ask will favor selling the option. You should ask the broker what the margin requirement is for an execute/sell. Keep in mind this usually cannot be done on line, if I recall, when I wanted to execute, it was a (n expensive) manual order. 3 - I think I answered in (2), but in general they are not identical, the bid/ask on options can get crazy. Just look at some thinly traded strikes and you'll see what I mean. |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | How long can a company keep the money raised from IPO of its stocks? | Is it correct that there is no limit on the length of the time that the company can keep the money raised from IPO of its stocks, unlike for the debt of the company where there is a limit? Yes that is correct, there is no limit. But a company can buy back its shares any time it wants. Anyone else can also buy shares on the market whenever they want. |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | Can someone explain a stock's “bid” vs. “ask” price relative to “current” price? | "The current stock price you're referring to is actually the price of the last trade. It is a historical price – but during market hours, that's usually mere seconds ago for very liquid stocks. Whereas, the bid and ask are the best potential prices that buyers and sellers are willing to transact at: the bid for the buying side, and the ask for the selling side. But, think of the bid and ask prices you see as ""tip of the iceberg"" prices. That is: The ""Bid: 13.20 x200"" is an indication that there are potential buyers bidding $13.20 for up to 200 shares. Their bids are the highest currently bid; and there are others in line behind with lower bid prices. So the ""bid"" you're seeing is actually the best bid price at that moment. If you entered a ""market"" order to sell more than 200 shares, part of your order would likely be filled at a lower price. The ""Ask: 13.27 x1,000"" is an indication that there are potential sellers asking $13.27 for up to 1000 shares. Their ask prices are the lowest currently asked; and there are others in line behind with higher ask prices. So the ""ask"" you're seeing is the best asking price at that moment. If you entered a ""market"" order to buy more than 1000 shares, part of your order would likely be filled at a higher price. A transaction takes place when either a potential buyer is willing to pay the asking price, or a potential seller is willing to accept the bid price, or else they meet in the middle if both buyers and sellers change their orders. Note: There are primarily two kinds of stock exchanges. The one I just described is a typical order-driven matched bargain market, and perhaps the kind you're referring to. The other kind is a quote-driven over-the-counter market where there is a market-maker, as JohnFx already mentioned. In those cases, the spread between the bid & ask goes to the market maker as compensation for making a market in a stock. For a liquid stock that is easy for the market maker to turn around and buy/sell to somebody else, the spread is small (narrow). For illiquid stocks that are harder to deal in, the spread is larger (wide) to compensate the market-maker having to potentially carry the stock in inventory for some period of time, during which there's a risk to him if it moves in the wrong direction. Finally ... if you wanted to buy 1000 shares, you could enter a market order, in which case as described above you'll pay $13.27. If you wanted to buy your shares at no more than $13.22 instead, i.e. the so-called ""current"" price, then you would enter a limit order for 1000 shares at $13.22. And more to the point, your order would become the new highest-bid price (until somebody else accepts your bid for their shares.) Of course, there's no guarantee that with a limit order that you will get filled; your order could expire at the end of the day if nobody accepts your bid." |
Based on your financial expertise, provide your response or viewpoint on the given financial question or topic. | Why would we need a “stop-limit order” for selling? | If one wants to have a bound on the loss percentages that are acceptable, this is would be a way to enforce that. For example, suppose someone wants to have a 5% stop-loss but doesn't want this to be worse than 10% as if the stock goes down more than 10% then the sell shouldn't happen. Thus, if the stock opened in a gap down 15% one day, this triggers the stop-loss and would exit at too low of a price as the gap was quite high as I wonder how familiar are you with how much a stock's price could change that makes the prices not be as continuous as one would think. At least this would be my thinking on a volatile stock where one may want to try to limit losses if the stock does fall within a specific range. |
Utilize your financial knowledge, give your answer or opinion to the input question or subject. | Is stock in a private corporation taxable? | "This stock is the same as any other, but you need to keep clear in your head that you and your company are now different entities. You (the person) will pay tax on capital gains and losses when you sell any stock that you hold in your own name. You'll also owe ""regular"" tax if you draw a salary, etc. The fact that it may be ""your"" company does not change these things. The company will not recognize a gain by selling stock to raise capital since it's nominally exchanging things of equal value, say $100 in cash for $100 in stock. In order to sell stock, however, you MIGHT need to register with the SEC depending on how you're going about finding your investors, so keep that in mind." |
Based on your financial expertise, provide your response or viewpoint on the given financial question or topic. | What does “no adjustments” mean? | Typically that applies if the broker Form 1099-B reports an incorrect basis to the IRS. If the Form 1099-B shows incorrect basis relative to your records, then you can use 8949, column (g) to report the correct basis. The 8949 Instructions provide a brief example. http://www.irs.gov/pub/irs-prior/i8949--2013.pdf Although you have an obligation to report all income, and hence to report the true basis, as a practical matter this information will usually be correct as presented by the broker. If you have separate information or reports relating to your investments, and you are so inclined, then you can double-check the basis information in your 1099-B. If you aren't aware of basis discrepancies, then the adjustments probably don't apply to you and your investments can stick to Schedule D. |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | Does buying and selling a stock OR holding onto it make a company look better? | "Not sure I fully understand your question but my take on it is this: There a lot of people out there that admire companies and own the stock just because they like the company. For example, I know some kids who own Disney stock. They only have a share or two but they keep it because they want to say ""I own a part of Disney."" Realistically speaking, if they hold or sell the stock it is so minuscule to have any realizable affect on the overall value of the stock which does not really make the company look better from an investor perspective. However, if a company has people that just want to own the stock just like your uncle are indeed ""better"" because they must have provided a product or service that is valued intrinsically." |
Share your insights or perspective on the financial matter presented in the input. | What is the buy-hold-sell indication based on? | The indication is based on the average Buy-Hold-Sell rating of a group of fundamental analysts. The individual analysts provide a Buy, Hold or Sell recommendation based on where the current price of the stock is compared to the perceived value of the stock by the analyst. Note that this perceived value is based on many assumptions by the analyst and their biased view of the stock. That is why different fundamental analysts provide different values and different recommendations on the same stock. So basically if the stock's price is below the analyst's perceived value it will be given a Buy recommendation, if the price is equal with the perceived value it will be given a Hold recommendation and if the price is more than the perceived value it will be given a Sell recommendation. As the others have said this information IMHO is useless. |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | Does bull/bear market actually make a difference? | "Who are the losers going to be? If you can tell me for certain which firms will do worst in a bear market and can time it so that this information is not already priced into the market then you can make money. If not don't try. In a bull market stocks tend to act ""normally"" with established patterns such as correlations acting as expected and stocks more or less pricing to their fundamentals. In a bear market fear tends to overrule all of those things. You get large drops on relatively minor bad news and modest rallies on even the best news which results in stocks being undervalued against their fundamentals. In the crash itself it is quite easy to make money shorting. In an environment where stocks are undervalued, such as a bear market, you run the risk that your short, no matter how sure you are that the stock will fall, is seen as being undervalued and will rise. In fact your selling of a ""losing"" stock might cause it to hit levels where value investors already have limits set. This could bring a LOT of buyers into the market. Due to the fact that correlations break down creating portfolios with the correct risk level, which is what funds are required to do not only by their contracts but also by law to an extent, is extremely difficult. Risk management (keeping all kinds to within certain bounds) is one of the most difficult parts of a manager's job and is even difficult in abnormal market conditions. In the long run (definitions may vary) stock prices in general go up (for those companies who aren't bankrupted at least) so shorting in a bear market is not a long term strategy either and will not produce long term returns on capital. In addition to this risk you run the risk that your counterparty (such as Lehman brothers?) will file for bankruptcy and you won't be able to cover the position before the lender wants you to repay their stock to them landing you in even more problems." |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | What does the term “match the market” mean? | If your returns match the market, that means their rate of return is the same as the market in question. If your returns beat the market, that means their rate of return is higher. There's no one 'market', mind you. I invest in mutual funds that track the S&P500 (which is, very roughly, the U.S. stock market), that track the Canadian stock market, that track the international stock market, and which track the Canadian bond market. In general, you should be deeply dubious of any advertised investment option that promises to beat the market. It's certainly possible to do so. If you buy a single stock, for example, that stock may go up by 40% over the course of a year while the market may go up by 5%. However, you are likely taking on substantially more risk. So there's a very good chance (likely, a greater chance) that the investment would go down, losing you money. |
Share your insights or perspective on the financial matter presented in the input. | Job Offer - Explain Stock Options [US] | "An option is a financial instrument instrument that gives you the right, but not the obligation, to do some transaction in the future at a given price. An employee stock option is a kind of ""call option"" -- it gives you the right, but not the obligation, to buy the stock at a certain price (the ""exercise price"", usually set as the price of the stock when the option was granted). The idea is that you would ""exercise"" the option (buy the stock at the given price as provided by the option), if the value of the stock is higher than the exercise price, and not if it is lower. The option is gifted to you. But that does not mean you get any stock. If and when you choose to exercise the option, you would buy the stock with your own money. At what time you can exercise the option (and how many shares you can exercise at a given time) will be specified in the agreement. Usually, you can only exercise a particular share after it has ""vested"" (according to some vesting schedule), and you lose the ability to exercise after you no longer work for the company (plus perhaps a grace period), or after the option expires." |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | Selling put and call Loss Scenario Examples | "The question you are asking concerns the exercise of a short option position. The other replies do not appear to address this situation. Suppose that Apple is trading at $96 and you sell a put option with a strike price of $95 for some future delivery date - say August 2016. The option contract is for 100 shares and you sell the contract for a premium of $3.20. When you sell the option your account will be credited with the premium and debited with the broker commission. The premium you receive will be $320 = 100 x $3.20. The commission you pay will depend on you broker. Now suppose that the price of Apple drops to $90 and your option is exercised, either on expiry or prior to expiry. Then you would be obliged to take delivery of 100 Apple shares at the contracted option strike price of $95 costing you $9,500 plus broker commission. If you immediately sell the Apple shares you have purchased under your contract obligations, then assuming you sell the shares at the current market price of $90 you would realise a loss of $500 ( = 100x($95-$90) )plus commission. Since you received a premium of $320 when you sold the put option, your net loss would be $500-$320 = $180 plus any commissions paid to your broker. Now let's look at the case of selling a call option. Again assume that the price of Apple is $96 and you sell a call option for 100 shares with a strike price of $97 for a premium of $3.60. The premium you receive would be $360 = 100 x $3.60. You would also be debited for commission by your broker. Now suppose that the price of Apple shares rises to $101 and your option is exercised. Then you would be obliged to deliver 100 Apple shares to the party exercising the option at the contracted strike price of $97. If you did not own the shares to effect delivery, then you would need to purchase those shares in the market at the current market price of $101, and then sell them to the party exercising the option at the strike price of $97. This would realise an immediate loss of $400 = 100 x ($101-$97) plus any commission payable. If you did own the shares, then you would simply deliver them and possibly pay some commission or a delivery fee to your broker. Since you received $360 when you sold the option, your net loss would be $40 = $400-$360 plus any commission and fees payable to the broker. It is important to understand that in addition to these accounting items, short option positions carry with them a ""margin"" requirement. You will need to maintain a margin deposit to show ""good faith"" so long as the short option position is open. If the option you have sold moves against you, then you will be called upon to put up extra margin to cover any potential losses." |
Based on your financial expertise, provide your response or viewpoint on the given financial question or topic. | Best Time to buy a stock in a day | "The best time to buy a stock is the time of day when the stock price is lowest! Obviously you learned nothing from that sentence, but unfortunately you won't get a much better answer than that. Here's a question that is very similar to yours: ""Is it better to have a picnic for lunch or for dinner to minimize the chance of getting rained out?"" Every day is different..." |
Share your insights or perspective on the financial matter presented in the input. | How to know which companies enter the stock market? | Market Watch has an IPO calender with details of upcoming IPOs that should provide most of the information you need. |
Utilize your financial knowledge, give your answer or opinion to the input question or subject. | Question about car loan payment | This depends on what the alternative is. Your loan of .99% is very favorable rate. If you have the 15,000 right now but only hold it in your checking account or cash then you might as well just pay it all off(assuming you have an adequate emergency fund). Paying the debt off sooner will save you on interest. Currently if you pay the minimum you will pay a total of $15,230 by the end of the loan, a $230 premium to $15,000. - Math credit goes to Joe If you have an investment vehicle you feel can successfully yield more then .99%, you might want to consider investing that money instead, while paying the minimum on your car loan. Also be sure to check the .99% is not an introductory rate which increases later on. It comes down to whether you can get a better return then .99% investing that money or whether you rather just pay off the debt and not worry about it. If you don't want to bother investing the money, than just pay it off... I also assumed you have no other revolving debt with a higher APR. If you do, first pay off the higher APR debt. |
Offer your thoughts or opinion on the input financial query or topic using your financial background. | How to evaluate growth stocks | A classic text on growth stock picking is Common Stock and Uncommon Profits By Philip Fisher, with a 15 point checklist. Here is a summary of the list that you can check out. |
Utilize your financial knowledge, give your answer or opinion to the input question or subject. | What should I do with the stock from my Employee Stock Purchase Plan? | While my margin is not nearly as good as yours, I sell out early. I generally think it's a bad idea to hold any single stock, as they can vary wildly in value. However, as you mention, it's advantageous to hold for one year. Read more about Capital Gains Taxes here and here. |
Utilize your financial knowledge, give your answer or opinion to the input question or subject. | What happens to the insider trade profits? | "You seem to have a little confusion over terminology that should be cleared up: You are calling this ""day-trading"" Day-trading is the term for performing multiple trading actions in a single day. While it appears that the COO has performed a buy and a sell on the same day, most people would consider this a 'single trade'. In reality, it seems that the COO had 'stock options' [a contract providing the option for the holder to buy stock at a specific price, at some point in the future], provided as part of his compensation package. He decided or was required to 'exercise' those options today. This means he bought the shares using his special 'option price'. It is extremely common for employees who exercise stock options, to sell all of the resulting stock immediately. This is very different from usual day-trading, which implies that he would have bought stock in the morning at a low price, and then sold it later at a high price. You are calling this 'insider trading'. That term specifically often implies some level of unethical behavior. In general, stock options offered to executive employees are strictly limited in how they can be exercised. For example, most stock option plans require employees to wait x number of years before they can exercise them. This gives the employee incentive to stay longer, and for a high-level executive with the ability to strongly impact company performance, it gives incentive to do well. Technically you are correct, this is likely considered an 'insider trade', but given that it seems to have been a stock option exercise, it does not necessarily imply that there was any special reasoning for why he did the trade today. It could simply be that today was the first day the stock option rules allowed him to exercise. As to your final question - no, these profits are the COO's, to do with as he likes." |
Share your insights or perspective on the financial matter presented in the input. | How does a public company issue new shares without diluting the value held by existing shareholders? | Unissued capital is only a token restriction. When a company is incorporated a maximum number of shares is specified in the legal documentation. Most companies will make this an extremely large number so they never face that limitation. See here. You wouldn't necessarily expect the stock price to change. The reason a company issues new stock is as a way to raise capital. Although new stock is issued, the cash raised by the sale becomes an Asset on the company's balance sheet. There's a good worked example in this Wikipedia article. Following a rights issue the Liabilities of the company will increase to account for the increase in owner's equity, but the Assets will also increase by the same amount with the cash received. Whether the stock price changes will depend upon what price the stock is issued at and on the market's opinions about the company's growth potential now it has new capital to invest. If the new stock is issued at the same price as the current market price, there's no particular reason to expect the share price to change. Again Wikipedia has more detail. When new stock is issued it is usually offered to existing shareholders first, in proportion to their current holding. If the shareholder decides to purchase the new stock in full then their position won't be diluted. If they opt not to buy the new stock, they will now own a smaller percentage of the company as their stocks will make up a smaller part of the now larger number of shares. |
Offer your insights or judgment on the input financial query or topic using your financial expertise. | What is an exercise price in regards to restricted stock awards? | It's still the purchase price or the price at which the shares are purchased or granted. This Investopedia article describes how the price is used for tax purposes: The amount that must be declared [for tax purposes] is determined by subtracting the original purchase or exercise price of the stock (which may be zero) from the fair market value of the stock as of the date that the stock becomes fully vested. Restricted stock awards are similar to stock options. The employer promises to grant the employee a certain number of shares upon the completion of the vesting schedule. The price at which the shares are purchased (or granted, if the price is zero) is the exercise price. |
Utilize your financial knowledge, give your answer or opinion to the input question or subject. | If I sell a stock that I don't have, am I required to buy it before a certain amount of time? | I'm just began playing in the stock market. I assume you mean that you're not using real money, but rather you have an account with a stock simulator like the one Investopedia offers. I am hopeful that's the case due to the high level of risk involved in short selling like you're describing. Here is another post about short selling that expands a bit on that point. To learn much more about the ins and outs of short selling I will point again to Investopedia. I swear I don't work for them, but they do have a great short selling tutorial. When you short sell a stock you are borrowing the stock from your broker. (The broker typically uses stock held by one or more of his clients to cover the loan.) Since it's basically a loan you pay interest. Of course the longer you hold it the more interest you pay. Also, as Joe mentioned there are scenarios in which you may be forced to buy the stock (at a higher price than you sold it). This tends to happen when the stock price is going against the short sell (i.e. you lose money). Finally, did anyone mention that the potential losses in a short sell are infinite? |
Utilize your financial knowledge, give your answer or opinion to the input question or subject. | Losing Money with Norbert's Gambit | "When you hold units of the DLR/DLR.U (TSX) ETF, you are indirectly holding U.S. dollars cash or cash equivalents. The ETF can be thought of as a container. The container gives you the convenience of holding USD in, say, CAD-denominated accounts that don't normally provide for USD cash balances. The ETF price ($12.33 and $12.12, in your example) simply reflects the CAD price of those USD, and the change is because the currencies moved with respect to each other. And so, necessarily, given how the ETF is made up, when the value of the U.S. dollar declines vs. the Canadian dollar, it follows that the value of your units of DLR declines as quoted in Canadian dollar terms. Currencies move all the time. Similarly, if you held the same amount of value in U.S. dollars, directly, instead of using the ETF, you would still experience a loss when quoted in Canadian dollar terms. In other words, whether or not your U.S. dollars are tied up either in DLR/DLR.U or else sitting in a U.S. dollar cash balance in your brokerage account, there's not much of a difference: You ""lose"" Canadian dollar equivalent when the value of USD declines with respect to CAD. Selling, more quickly, your DLR.U units in a USD-denominated account to yield U.S. dollars that you then directly hold does not insulate you from the same currency risk. What it does is reduce your exposure to other cost/risk factors inherent with ETFs: liquidity, spreads, and fees. However, I doubt that any of those played a significant part in the change of value from $12.33 to $12.12 that you described." |
Offer your insights or judgment on the input financial query or topic using your financial expertise. | Am I understanding buying options on stock correctly | Here is a quick and dirty explanation of options. In a nutshell, you pay a certain amount to buy a contract that gives you the right, but not the obligation, to buy or sell a stock at a predetermined price at some date in the future. They come in a few flavors: I'll give you $100 if you let me buy 10,000 shares of XYZ for $10 more per share than it is trading at today any time before August 10th. I'll give you $100 if you promise to buy 10,000 shares of XYZ from me for $10 less per share than it is trading at today if I ask before August 10th. There are also two main types based on the expiration behavior: There are lots of strategies that employ options, too many to go into. Two key uses are.. Leverage: Buying Call options can give you a much higher return on your investment than just investing in the actual stock. However, with much higher risk of losing all of your investment instead of just some of it when the stock drops. Hedging: If you already own the underlying stock, put options can be used to buy down risk of serious drops in a holding. |
Based on your financial expertise, provide your response or viewpoint on the given financial question or topic. | How much hassle is it inheriting shares? | If you prefer the stock rather than cash, you might find it easier to take the cash, report it, and then buy the same stock from within your own country. |
Offer your insights or judgment on the input financial query or topic using your financial expertise. | What is the smartest thing to do in case of a stock market crash | "Remind yourself that markets recover, usually within a few years. If you believe this and can remind yourself of this, you will be able to see the down cycles of the market as an opportunity to buy stock ""on sale"". No one knows the future, so many people have found investing on a regular schedule to be helpful. By putting in the same amount of money each period, you will end up buying fewer shares when the market is up, and more when it is down. As long as your time horizon is appropriate, you should be able to wait out the ups and downs. Stocks are volatile by their very nature, so if you find that you are very concerned by this, you might want to consider whether you should adjust the amount of risk in your investments, since over time, most people lose money by trying to ""time"" the market. However, if your investment goals and requirements haven't changed, there likely isn't any need to change the types of assets you are investing in, as what you are choosing to invest in should depend on your personal situation. Edit: I am assuming you want to be a long-term investor and owner, making money by owning a portion of companies' profits, and not by trading stocks and/or speculation." |
Based on your financial expertise, provide your response or viewpoint on the given financial question or topic. | Should I buy ~$2200 of a hot stock or invest elsewhere? | Forget investing, you need to focus on managing your debt. I would keep the 6k in a checking or savings account because you need that money in case of an emergency. If you save up more than 10k, use the excess to pay down the principal on your debt. Worry about investing when you have a positive net worth. |
Based on your financial expertise, provide your response or viewpoint on the given financial question or topic. | Stock Trade Transaction Fee - at what point is it worth it | I'm going to assume that you want to be invested all the time and each trade consists in selling a security and buying another one (similar to your example). How much commissions you are willing to pay depends on several factors, but one way to think about it is as follows. You have a position in stock A and you want to switch to stock B because you think it will perform better. If you think there's a good chance (>50%) that B will outperform A by more than x% then you can happily pay up to x/2% commissions and still make money over a long time horizon. If you like formulae, one way to express it is: Where: Example: if you tend to be right 51% of the time (hit rate), and gain 110% more than you lose on average (win loss ratio), you can see that your expected profit is: 5.1% - commissions, so you could pay 2.5% commissions on entering and closing the position and still make money*. Unfortunately, common sense, statistics and numerous studies tell us a sad truth: on average, people have a hit rate of 50% and a win/loss ratio of 100%. Which means that their expected profit per trade is 0% - commission. Based on that crude observation - unless you can prove to yourself that you are better than average - you should aim at reducing commissions paid to your broker as much as possible through: * 51% and 110% are not random numbers, they correspond to the results of the top 15% (professional) managers in a research paper using a sample of 215 funds managing $150bn. |
Offer your insights or judgment on the input financial query or topic using your financial expertise. | How is unmarketable stock valued for tax purposes? | How you are taxed will depend on what kind of stock awards they are. The value will be determined by the company that issues it, and appropriate tax forms will be sent to you to include with your taxes. The way the value is determined is an accounting question that is off-topic here, but the value will be stated on your stock award paperwork. If you are awarded the stock directly then that value will be taxed as ordinary income. If you are awarded options, then you can purchase the stock to start the clock on long-term capital gains, but you will not incur any tax liability through the initial purchase. If the company is sold privately and you have held the stock for over 1 year, then yes, it will be taxed as a long-term capital gain. If you receive/exercise the stock less than 1 year before such an acquisition, then it will be considered a short-term capital gain and will be taxed as ordinary income. |
Utilize your financial knowledge, give your answer or opinion to the input question or subject. | What is buying pressure? | "Buying pressure is when there are more buy orders than sell orders outstanding. Just because someone wants to buy a stock doesn't mean there's a seller ready to fill that order. When there's buying pressure, stock prices rise. When there's selling pressure, stock prices fall. There can be high volume where buying and selling are roughly equal, in which case share prices wouldn't move much. The market makers who actually fill buy and sell orders for stock will raise share prices in the face of buying pressure and lower them in the face of selling pressure. That's because they get to keep the margin between what they bought shares from a seller for and what they can sell them to a new buyer for. Here's an explanation from InvestorPlace.com about ""buying pressure"": Buying pressure can basically be defined as increasingly higher demand for a particular stock's shares. This demand for shares exceeds the supply and causes the price to rise. ... The strength or weakness of a stock determines how much buying or selling interest will be required to break support and resistance areas. I hope this helps!" |
Based on your financial expertise, provide your response or viewpoint on the given financial question or topic. | Distribution rules LLC vs. S-Corp | "It's actually the other way around. Distributions in an LLC are usually based on each member's equity share, although the operating agreement can specify how often such distributions are made. Shareholders in a corporation can receive dividends, but those are determined by the corporation's board and can vary depending on the class of stock each shareholder owns. Preferred-class shareholders, who may hold a smaller overall fraction of the company's outstanding shares than the common stock shareholders, may receive disproportionately larger dividends per share than common stock shareholders, which is one of the (many) reasons that preferred stock is a better choice when it is available. Take, for instance, what Berkshire Class ""A"" shareholders receive in dividends per year compared to Class ""B"" shareholders. Here's a good link from LegalZoom that can explain what you're asking about: Explanation of LLC distributions I hope this helps. Good luck!" |
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