Various types of speculators

“Four kinds of speculators operate in the Indian Stock Exchange. They are known as bull, bear, stag and lame duck. A Bull also called as Tejiwala is an operator who is hopeful of price rise in the near future.”

Four kinds of speculators operate in the Indian Stock Exchange. They are known as bull, bear, stag and lame duck. A Bull also called as Tejiwala is an operator who is hopeful of price rise in the near future. In anticipation of price rise he makes purchases of shares and other securities with the intention of selling them at higher prices in future. He being a speculator has no intention of taking delivery of securities but deals only in difference of prices. Such as a speculator is called a Bull because of his resemblance of behaviour with a bull. As a bull is famous for throwing up the opponent in the air, similarly a bull speculator also takes the price of securities high up in the air. He does this by placing high-value purchase orders.

A bear or a Mandiwala on the other hand is a speculator who is wary of fall in prices and hence sells securities so that he may buy them at cheap price in future. A bear does not have securities at present but sells them at higher prices in anticipation that he will supply them business purchasing at lower prices in the future. If the prices move down as per the expectations of the bear he will earn profits out of these transactions. 

Just as a bear presses his victims down to the ground, the bear speculator tends to force down the prices of different securities. It so happens that when bearish operators are bent upon selling securities, the prices also automatically come down. It is a usual practice that a bear is not interested in taking the delivery of securities but he is desirous of getting the variation in prices, provided the prices come down. In case prices rise then he will have to pay the difference between the prices at which he purchased the securities and the prevailing prices on the date of delivery. 

Then comes a stag. A stag is that type of speculator who treads his path very carefully. He applies for shares in new companies and expects to sell them at a premium if he gets an allotment. He selects those companies whose shares are most in demand and are likely to carry a premium. He sells the shares before being called to pay the allotment money. A stag does not indulge in purchase and sale of shares in the market like a bull and a bear. A Lame Duck is nothing but a stressed bear. When a bear finds it difficult to complete his promise he is labeled as a lame duck.

WHO ARE SHARE MARKET PARTICIPANTS?

                                  In previous post we have learnt how share market works?.Now we will know who are the participants in share market.The participants in the share market are mainly divided in two

1. Individual retail investors
2. Institutional investors

                                  We all know individual retail investors are those individual who invest in stock market  

and institutional investors  for eg:Mutual funds,pension funds ,insurance companies etc  are those who receive income through premium,investment from their customers invest in share markets.In India LIC is the big bull i.e it is the word used for big investors.

                                  In retail investors they are divided into two types based on their investment purpose i.e traders and investors.Traders are those who hold shares for a very short period of time and they trade the shares for speculative purpose and on the other hand there are investors who invest in share for long term purpose i.e more than one year.

                                   To speculate(means to make profit from fluctuations) on a share the trader has to make a technical analysis on the shares (i.e this study is to analyse the movement of price with short term perspective)

                                For those who invest for long term perspective should do a fundamental analysis of the particular company viz it's financial strength,government support,operational efficiency etc.Because in long term company with strong fundamentals will only survive.

IN THE NEXT POST WE WILL LEARN ABOUT TYPES OF SPECULATORS.

HOW SHARE MARKET WORKS?

                                   In the earlier post we have discussed what is a share? Now the question is how share market or stock market works.
                                   First of all we should know what is a market.A market is place where goods and services are exchanged between buyers and sellers,or a market is a place where sellers and buyers interact with each other.Similarly share market is a place where shares are bought and sold.
                                   So the question is how the prices of these shares are determined?.They are determined   on the basis of demand and supply of a share in the market.And the demand of a share is dependent on the performance of the company,general economic situation in the economy,announcement of budget etc.
                                   for eg: take Infosys shares if the company has announced its quarterly results and if the results had reached the expectation of the market then the demand for the shares increases and simultaneously the share price also increases and viceversa
                                   It should be noted that not every time share prices are determined on the basis of demand and supply.Somtimes speculators tend to create artificial demand for a share and can increase it's price.
                                 

                                   

What is a "SHARE"?

                  Upto seventeenth century the world economy was primarily dependent on agriculture and its allied activities but after 1750 thanks to the Industrial revolution the situation has changed and there was a need for establishment of large scale industries.
                  These large scale industries used to make mass production and there was a necessity for huge capital investment.To provide these capital many types of business organisations has evolved such as sole proprietor,partnership etc.But they were unable to provide such huge capital.
                   Then evolved Company form of Organisation which can provide huge capital.The question is how companies can raise huge amount of capital?
                    A company first decides its capital requirement take for eg:100000. then this 1 lakh is divided into 10000 shares of RS.10 each and these share are sold to the public. There by making then the Shareholders of the company.Since they have contributed to the capital of the company they are the owners of the company.
                     There another question arises i.e since shareholder are the owners can they manage the day to day affairs of the company ?
                       The answer is 'no' because it is practically impossible for all the shareholder who are at different places to manage a company.So,they manage the business indirectly by appointing board of directors.
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Apple sends invite for 'iPad mini launch'

NEW YORK: Apple has sent out invites for an event next Tuesday, where it's expected to announce the release of a smaller iPad. 

The invite, sent to reporters Tuesday, doesn't hint at what will be revealed, beyond saying that "We've got a little more to show you." The event will be held in San Jose, California. 

Media and analysts have said for months that Apple has an " iPad mini" in the works. The tablet is thought to be about half the size of the regular iPad and to start at $249 or $299. The regular iPad starts at $499 for the most recent models. 

Apple founder Steve Jobs derided the idea of a smaller tablet two years ago, but Amazon.comhas had some success with its Kindle Fire, which is about half the size of the iPad and starts at $159. Analysts believe Apple wants to tackle that competition with its own similarly sized tablet. 

Reports suggest that the smaller iPad would have a screen that's 7.8 inches on the diagonal, a bit more than the Kindle Fire or Google's Nexus, with their 7-inch screens. The full-size iPad has a 9.7-inch screen, giving it about twice the display area as the 7-inch units. 

Apple typically starts selling a new phone or iPad a week or two after announcing it. But it could treat the new iPad as a minor product update, in which case it could start selling it right after the announcement. 

Apple shares rose $14.02, or 2.2 per cent, to $648.78 in midday trading Tuesday. The shares are off their all-time high of $705.07, hit September 21 when the iPhone 5 went on sale in stores

SWAPS vs OPTIONS vs FUTURES

Definition

A swap is a derivative in which two parties agree to exchange a set of cash flows (or leg) for another set. A notional principal amount is used to calculate each cash flow; these are rarely exchanged by the parties. A swap is usually used to hedge a risk, such as aninterest-rate risk, or to speculate on a price change. It may also be used to access an underlying asset in order to earn a profit or loss from any change in price while avoiding posting the notional amount in cash or collateral.

An option is a financial instrument that gives the holder the right to engage in a future transaction on an underlying security or futures contract. The holder is under no obligation to exercise this right. There are two main types of option. A call option gives the holder the right to purchase a specified quantity of a security at a fixed price (the strike price) on or before the specified expiration date. A put option gives the holder the right to sell. If the holder chooses to exercise the option, the party who sold, or wrote, the option is obliged to fulfil the terms of the contract.

Futures are traded on a futures exchange and represent an obligation to buy or sell a specified underlying instrument on a specified date (the delivery date or final settlement date) in the future at a specified price (the futures price). The settlement price is the price of the underlying asset on the delivery date. Both parties to a futures contract are legally bound to fulfil the contract on the delivery date. If the holder of a futures position wishes to exit their obligation before the delivery date, they must offset it either by selling a long position or buying back a short position. Such an action effectively closes the futures position and its contractual obligations.

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Advantages

• The use of derivatives means that some financial risks can be transferred to other parties who are more willing or better suited to take or manage those risks and can thus be a useful tool for risk management.
• Purchasing derivatives can be a safer choice if there is a possibility of a looming bear market as they are hedged, unlike equities.
• Buying now at a future price can be cheaper than buying at market price in the future, bearing in mind that the spot price could be less expensive.
• A long call option requires no obligation when it is due.

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Disadvantages

• If the market changes dramatically, it is possible to lose financially if the derivatives are being used as a speculative instrument.
• If you hold the put option on a derivative, you are obliged to adhere to it if the holder of the call chooses to exercise their right to sell or buy.

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Dos and Don’ts

Do

• Take time to consider which derivative is most suitable for the transaction you have in mind.
• Consult a financial intermediary or seek other expert guidance if you are unsure.

Don’t

• Don’t enter into a contract that will lock you in if there’s the slightest possibility that you may need to exit before its expiration date.
  
  

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