Why It Is Called A Stock Market For A Company's Stock Work?

1. It's called a stock market for a reason. It's a market, and as such can be characterized by the market model of economics. Using an example of a company you are familiar with, explain how the market for the company’s stock works. Why is the demand (buyer) curve down-sloping, why is the supply (seller) curve up-sloping, and what is the expected stock price? Why, and how, does the share price change? (Be sure to draw a diagram.)

The market for a company’s stock is determined by two curves, a downward sloping demand curve and an upward sloping demand curve, which together determine the price of the stock and the amount of stock available.

To understand how the price and quantity of a stock is determined, the curves must be understood first.

However, both quantities can change due to external shocks to the curves. Take for instance the drop in price of MRO stocks due the fallout of the Keystone pipeline expansion. When the Keystone expansion fell through, investors MRO would not be able to expand and increase the value of the stock. Thus, the demand for the MRO stock declined due to unwillingness of investors to buy, and to the demand curve shifts left. Therefore, the price has to drop in order to return the market to equilibrium.

2. In lectures I argued that options can be used as insurance against negative outcomes. In your written essay, explain how buying a put option may be used to insure against an adverse change in a long position on the underlying stock. Under what circumstances would a person use the option as insurance?

Buying a put option allows one to secure the right to sell the underlying stock at a given price during a set period of time, regardless of the price fluctuations of the underlying stock. Therefore, one could essentially buy a put option to secure the amount of gains one has made on the underlying stock in case the price of the currently held stock tanks. As a result, one can reduce the net amount

Write an essay to a smart relative about Exchange Traded Funds. By that I mean write to a person who is intelligent and can understand complex ideas, but doesn't know about ETFs. Explain to them the advantages and disadvantages of ETFs and why they might want to include them in their investment portfolio.

ETFs are similar to mutual funds, but they are priced based on the demand and supply of the ETFs rather than the net asset value of the securities in the portfolios. In addition, most ETFs are designed to follow a market index instead of a selected mix, like with mutual funds, which is advertised at potentially being profitable, but most tend to underperform the market.

Most ETFs are managed passively; thus, in the long run, ETFs will reduce the amount of fees and taxes incurred by reducing the amount of turnover. They also reduce risk by diversifying a portfolio without having to individually buy and manage each stock.

Therefore, for a person who is risk averse, it would be greatly beneficial to purchase ETFs since the reduce risk and fees while performing at the market, since in the long run a portfolio that is similar to the market will perform at the market or below. Thus, ETFs cannot perform above the market, and so if someone is expecting to make a large profit off ETFs, they should not consider