All right, here I sit, working at a website that encourages people to be writers, and I am telling them how they should write. The calculation involves taking the standard deviations of the monthly returns of the particular stock along with the S&P 500’s monthly returns for five years within the same time horizon and inserting the two standard deviations separately into an overall variance formula and dividing by the population variance. Using beta is much less complicated than calculating it. If a stock has beta of 1.0 it moves in congruence with the market. This means if the S&P 500 goes up 1% in a day, the stock should go up 1% in a day. Pfizer is usually a 0.8 beta; meaning if the market goes up 1% it will only increase 0.8%. Casinos usually have the highest betas.
Theoretically, an investor could make the quickest, and most significant gains with a high beta stock, but could lose the most as well if the market underperformed. When researching a stock on a financial website, there is typically a link for options chains. They are often listed in T” shaped boxes with call options (the right to buy the stock) on the left and put options (the right to sell the stock) on the right. News affects the expectations and decisions of the investing public and expectations determine stock prices.
The strike prices are listed down the center of the T”. These prices give a range in which the stock is expected to move. The people in the open interest column on the left are bullish; they think the stock price is going up. The people in the column on the right are bearish; they think the price is going down. This shows that more people want to buy the stock in the future than sell it. It is worth getting a second opinion, or in this case, thousands of opinions when purchasing a stock. If your stock makes the front page of the Wall Street Journal, you’re in for big gains or big trouble!
Presented here then, is a Q&A style article on everything you could need to know about the stock market as a beginner! A: Put simply, the stock market is an open market that allows buyers and sellers of securities and derivatives to complete their sales. It’s an abstract term really, and although often used interchangeably with the term stock exchange” it differs insofar as it describes a general idea, rather than a specific place. A: In contrast, a stock exchange is an actual place where buyers and sellers of securities can meet and complete their sales.
Popular stock exchanges you may have heard of are the New York Stock Exchange (NYSE), or the Australian Stock Exchange (ASX). Without the stock exchange, buyers and sellers of individual securities might have to advertise the sale of their shares, and seek for a buyer of similar volume independently. A day later you meet another buyer – one who would’ve paid much more for the stock you were selling – but because you had to independently find a buyer, you missed out on this opportunity. Waldo had finally found a place where no-one could ever find him…the trading floor of the New York Stock Exchange.