Lesson

What is a Stock? | Options Educator

Learn the fundamentals of stocks, exchanges, market indices, and bull/bear market cycles.

What you'll practice

  • The shop has 1,000,000 shares and earns $2,000,000 in profit. Hold enough shares that your slice of that profit is $100.
  • Investors now trade the shares among themselves. Move the price until the shop's market cap, the price times its 1,000,000 shares, is $15,000,000.
  • Predict: the shop does a "2:1 split". Each share becomes two and the price halves. What happens to your ownership share?

In this lesson

The Ownership Key

  • Stock = Part Ownership of a real business
  • You are a partner, not just a gambler
  • You profit when the business grows
  • Golden Rule: Own businesses you believe in

The Marketplace

  • The 'Market' connects buyers and sellers
  • You are trading with other investors
  • Exchanges (NYSE, NASDAQ) make trading safe and fast
  • Golden Rule: Price is just an agreement between two people

The Market Scoreboard

  • Index = Average performance of many stocks
  • S&P 500 is the most important scoreboard
  • Indices smooth out individual stock volatility
  • Golden Rule: Trade with the market, not against it

The Market's Mood

  • Bull = UP (Optimism)
  • Bear = DOWN (Pessimism)
  • Markets spend more time in Bull mode than Bear mode
  • Golden Rule: Don't panic in a Bear market - it's a sale!

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