Organization and Functions

of securities market

Chapter 4 (cont.)
 What is traded on Stock Exchange

 Blue Chip Stocks: One common definition of a blue chip is a company with a
long, uninterrupted history of dividends payments.
 Growth stocks are the one in which the company reinvests most of its earnings
into profitable investment opportunities rather than returning them directly to
the shareholders.
 Defensive/Cashflow Stocks: A defensive is largely immune to changes in the
macro economy. Regardless of whether the overall market is bullish or
bearish, defensive stocks continue to sell their products, such as retail,
grocery, utilities, F&B.  Long-term investment
 What is traded on Stock Exchange

 Speculative Stocks has the potential to make its owners a lot of money
quickly, or unusually high degree of risk.
 Penny stocks are sold for less than par value, VND10.000/share (VNIndex)
 Controlling securities: the punishment against listed companies that do not
fully fulfill their obligations  suspended.
 Trade orders

 Market orders: The most common type of order is the market order  to
buy or sell a stock at the best current price.
 Limit orders: The individual placing a limit order specifies the buy or sell
price.
 Limit order must specify a price and a time limit.
  Margin account allows the investor to borrow a percentage of
purchase price from the brokerage firm.

 Margin Transactions: On any type of order, an investor can

pay for the stock with cash or borrow part of the cost,
leveraging the transaction.

Margin  Leverage is accomplished by buying on margin

Transactions % 𝑴𝒂𝒓𝒈𝒊𝒏=
𝑬𝒒𝒖𝒊𝒕𝒚
𝑨𝒔𝒔𝒆𝒕
𝟏
𝑳𝒆𝒗𝒆𝒓𝒂𝒈𝒆 𝒇𝒂𝒄𝒕𝒐𝒓 =
% 𝒎𝒂𝒓𝒈𝒊𝒏𝒓𝒆𝒒𝒖𝒊𝒓𝒆𝒎𝒆𝒏𝒕

𝑹𝑶𝑬=𝑳𝒆𝒗𝒆𝒓𝒂𝒈𝒆 𝒇𝒂𝒄𝒕𝒐𝒓 𝒙 𝑹𝒂𝒕𝒆𝒐𝒇 𝒓𝒆𝒕𝒖𝒓𝒏𝒐𝒏𝒔𝒕𝒐𝒄𝒌

Margin requirement: the % total transaction value must be paid in cash
  Maintenance margin: the required proportion of your
equity to the total value of the stock; the maintenance
margin protects the broker if the stock price declines

 Margin call: If the stock price declines to the point

where your equity drops below maintenance margin,
the account is considered under margined and you will
Maintenance receive a margin call to provide more equity.
Margin
𝑀𝑎𝑟𝑘𝑒𝑡 𝑣𝑎𝑙𝑢𝑒− 𝐵𝑜𝑟𝑟𝑜𝑤𝑖𝑛𝑔
% 𝒎𝒂𝒊𝒏𝒕𝒆𝒏𝒂𝒏𝒄𝒆𝒎𝒂𝒓𝒈𝒊𝒏=
𝑀𝑎𝑟𝑘𝑒𝑡 𝑉𝑎𝑙𝑢𝑒
𝐼𝑛𝑖𝑡𝑖𝑎𝑙𝑝𝑟𝑖𝑐𝑒∗(1−%𝑚𝑎𝑟𝑔𝑖𝑛𝑟𝑒𝑞𝑢𝑖𝑟𝑒𝑚𝑒𝑛𝑡)
𝑷𝒓𝒊𝒄𝒆𝒎𝒂𝒓𝒈𝒊𝒏𝒄𝒂𝒍𝒍=
(1−%𝑚𝑎𝑖𝑛𝑡𝑒𝑛𝑎𝑛𝑐𝑒𝑚𝑎𝑟𝑔𝑖𝑛)
Market value: Market Price * Number of shares