Other important aspects about secondary market

Bid and Ask

•      The ‘Bid’ is the buyer’s price. It is this price that you need to know when you have to sell a stock. Bid is the rate/price at which there is a ready buyer for the stock, which you intend to sell.

•      The ‘Ask’ (or offer) is what you need to know when you're buying i.e. this is the rate/ price at which there is seller ready to sell his stock. The seller will sell his stock if he gets the quoted “Ask’ price.

Types of order

•      Time Conditions

–     Day

–     IOC – Immediate or Cancel

•      Quantity Conditions

–     Disclosed Quantity (DQ)

•      Price Conditions

–     Market

–     Stop-Loss

–     Trigger Price

•      At best order

•      Limit Order

•      Immediate or Cancel

•      Discretionary order

•      Limited Discretionary Order

•      Open Order

•      Stop-Loss Order

Basic Types of Transactions

•      Long Purchase

•      Margin Trading

•      Short Selling

Margin Trading

•      Margin =

                                    Value of Security – Debit balance

                                                Value of security

•      Magnified Profit and Losses

•      Types of Margin

ü  Initial Margin

ü  Maintenance Margin

ü  Return on invested Capital=

(total current income received) – (total interest paid on margin loan) + 

(market value of securities sale) – (market value of securities)

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Amount of equity invested