Stock trading is a very interesting subject in finance. There are numerous types of stock trades that you may not have even known existed! This blog post will discuss the most common types of stock trading, including options, futures, and more!
Options are contracts that give the holder, or person who bought it, the right to purchase (for the call) or sell (for a put) a certain amount of an underlying asset at a predetermined price on or before a certain date.
A futures contract is an agreement to buy or sell a certain amount of an underlying asset at a predetermined price on some future date. Typically the underlying asset is a commodity or security.
A swap is a contract between two parties to trade cash flows of one party’s financial instrument for those of the other party’s financial instrument. The most common types of swaps involve interest rates and currency exchange.
- Spot Market
The spot market is a public exchange where the buying and selling of futures contracts for immediate delivery occurs. The Stock quote (股票報價)is decided by the current bid and ask prices offered by the market members.
Arbitrage consists of taking advantage of a price difference for the same security in two different markets. The transaction that takes place aims to benefit from this temporary pricing anomaly.
- Short Selling
Short selling is the act of borrowing securities and then immediately selling them to buy them back later at a lower price. The process makes money for one party when it lowers its purchase cost but creates risk for another party because an asset has been borrowed.
A derivative is a contract that derives its value from the performance of an underlying asset. The four most common types are futures, forwards, swaps and options.
- Repurchase Agreement
A repurchase agreement, or repo for short, is a transaction in which one party sells securities to another with an agreement to buy them back later. This type of deal involves either very safe Treasury bills or more risky corporate bonds and loans.
- Reverse Repurchase Agreement
A reverse repurchase agreement is similar to a regular repo, except that the party selling securities agrees to buy them back at an agreed-upon price. The other side brings cash into the deal and buys Treasuries or corporate bonds.
- Block Trades
Block trades are large transactions conducted away from the open market to avoid significantly affecting prices. The block trade volume is reported after the close of trading each day.
How can one use these?
Now you know all about stock trading! If you are interested, there are ways to start investing with just your spare change or even starting an online business where you trade stocks full-time!
Stock trading has become popular for many people because it can be very profitable if done correctly! There are tons of different kinds of stock trades to choose from to meet your specific needs.