《投资概念学》（英文版） Placing Orders: Types of Orders

CHAPTER SIX MARKET MECHANICS Practical Investment Management Robert A Strong

MARKET MECHANICS CHAPTER SIX Practical Investment Management Robert A. Strong

Placing Orders: Order Information Flow 3. Confirms trade Stock Exchange 2. Submits 3, Confirms order Brokerage Firm trade Accounting Operations 4. Confirms trade 5, Mails confirmation statement Broker 1. Places order Individual Investor Strong c6- market Mechanics 6-2

6 - 2 Strong C6 – Market Mechanics Placing Orders: Order Information Flow Individual Investor Broker 1. Places order 4. Confirms trade Stock Exchange Brokerage Firm Accounting Operations 2. Submits 3. Confirms order trade 3. Confirms trade 5. Mails confirmation statement

Placing Orders: Types of Orders e Market orders are to be executed as soon as possible after reaching the exchange floor. Limit orders must specify a price and a time imit,eg.“Buy500at$90, good till canceled.” . A stop order differs from a limit order in that the order is only executed if the specified price, called the stop price, is touched Stop orders become market orders when the stop price is reached Strong c6- market Mechanics 6-3

6 - 3 Strong C6 – Market Mechanics Placing Orders: Types of Orders ◆ Market orders are to be executed as soon as possible after reaching the exchange floor. ◆ Limit orders must specify a price and a time limit, e.g. “Buy 500 at $90, good till canceled.” ◆ A stop order differs from a limit order in that the order is only executed if the specified price, called the stop price, is touched. Stop orders become market orders when the stop price is reached

Placing Orders: Types of Orders The most important use of a stop order is to protect a profit. Moving a stop up behind a rising stock is called using a crawling stop order. ◆ Other orders: once cancels the other all or none fi∥orki stop limit Strong c6- market Mechanics 6-4

6 - 4 Strong C6 – Market Mechanics Placing Orders: Types of Orders ◆ The most important use of a stop order is to protect a profit. Moving a stop up behind a rising stock is called using a crawling stop order. ◆ Other orders: - once cancels the other - all or none - fill or kill - stop limit

Placing Orders: Types of Orders Stock rises to 48 raise stop to 46 55 Stock rises to 40 raise stop to 38 45 Stock hits target Stop place stop at 33 Stop 35 Stop Stop is hit stock is sold 25 Buy stock 25 Target price 35 Time Strong c6- market Mechanics 6-5

6 - 5 Strong C6 – Market Mechanics Placing Orders: Types of Orders Insert Figure 6-3 here

Placing Orders: Settlement Procedures The activities surrounding the transfer of ownership are called settlement procedures. &In the united states stock and bond transactions settle three business days after the trade date A number of market speculators engage in a practice known as a day trade, which involves buying and selling securities on the same day. Strong c6- market Mechanics 6-6

6 - 6 Strong C6 – Market Mechanics Placing Orders: Settlement Procedures ◆ The activities surrounding the transfer of ownership are called settlement procedures. ◆ In the United States, stock and bond transactions settle three business days after the trade date. ◆ A number of market speculators engage in a practice known as a day trade, which involves buying and selling securities on the same day

The Specialist and the book Specialists help maintain a fair and orderly market To tighten the spread in the market, specialists may actively participate in the market Strong c6- market Mechanics 6-7

6 - 7 Strong C6 – Market Mechanics The Specialist and the Book ◆ Specialists help maintain a fair and orderly market. ◆ To tighten the spread in the market, specialists may actively participate in the market

The Specialist and the Book Unless a customer indicates a contrary wish, limit and stop orders are automatically adjusted 4 Strong c6- market Mechanics

6 - 8 Strong C6 – Market Mechanics The Specialist and the Book ◆ Unless a customer indicates a contrary wish, limit and stop orders are automatically adjusted downward for the payment of a cash dividend

Types of Accounts In a cash account, an investor must come up with cash equal to the full value of the securities purchased. Cash Account Assets 工立ab立1i七ies Cash 23,089.76 500DE 45,000.00 300工NC24,000.00 100 RBD 3,000.00 500 OCR 17,437.50 Equity112,52726 112,527.26 $112,527.26 Strong c6- market Mechanics 6-9

6 - 9 Strong C6 – Market Mechanics Types of Accounts In a cash account, an investor must come up with cash equal to the full value of the securities purchased. Cash Account Assets Liabilities Cash $23,089.76 500 DE 45,000.00 300 INTC 24,000.00 100 RBD 3,000.00 500 OCR 17,437.50 Equity $112,527.26 $112,527.26 $112,527.26

Types of Accounts A margin account permits an investor to borrow part of the cost of investments from a brokerage firm Margin Account Assets 工立ab立1i七ies 500DE s45,000.00 Margin$33,792.10 300INTc24,000.00 100 RBD 3000.00 500 OCR 17,437.50 Equity$55,645.40 89,437.50 89,437.50 Strong c6- market Mechanics 6-10

6 - 10 Strong C6 – Market Mechanics Types of Accounts A margin account permits an investor to borrow part of the cost of investments from a brokerage firm. Margin Account Assets Liabilities 500 DE $45,000.00 Margin $33,792.10 300 INTC 24,000.00 100 RBD 3,000.00 500 OCR 17,437.50 Equity $55,645.40 $89,437.50 $89,437.50