Note 3 - Penny Stocks Segment of the market that has often been a playground for fraud Stocks that are low-priced that typically start out at less than

Note 3 - Penny Stocks Segment of the market that has often...

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Penny Stocks Segment of the market that has often been a playground for fraud Stocks that are low-priced that typically start out at less than one dollar per share Sold on the promise of significant growth potential High risk as it is extremely vulnerable to manipulation Common scam – pump and dump Short Selling Profit from a bearish market Profiting when stock prices fall The practice of selling shares of stock that have been borrowed from a third party in exchange from a fee, with the intent of buying these shares back on a future date to return to the lender Short – sellers believe that the market price of a stock is going to drop and so they borrow stock and sell it now at the current price and hope to buy it back at a lower price before a pre-arranged future Extremely risky, mostly institutional investors will do this Short seller make a profit if they speculate correctly and the stock price falls, but they lo9se money if the stock price increases because they are forced to buy back these shares at a higher price so they can return them to the lender A short seller's profit is the difference between what they sell the borrowed shares for and what they are forced to pay in the market to buy back these shares for the lender; minus fees, commissions paid to the broker/lender How it works? Step 1 - short selling Lender borrow shares to short seller Short seller sell shares to the market Short seller pay lending fee to lender Step 2 - repurchasing Have a period of time to wait for price changes, then short seller repurchase shares at the current market price Short seller then return share to lender Example - Blackberry (current price - $10.78) Assume that you believe the Passport is not going to compete well against IPhone 6 and Samsung. If you believe blackberry stock is going to fall soon: o Borrow 200 BB shares from a broker, pay the commission fee o Sell these shares IMMEDIATELY, 200 x 10.78 = $ 2,156 o Wait patiently, assume a 30 day window before shares (200)must be returned to broker o If blackberry falls to $9.32 five days later, buy 200 x 9.32 = $ 1,864 o Return shares to broker o Profit $ 2156 - $ 1864 (+fees) = 292 (-fees) REIT 1.What does REIT stand for? Do REIT’s trade on an exchange or over the counter (OTC)? REIT stands for Real Estate Investment Trust. REIT’s are securities that trade on the stock exchange like a stock. Highly liquid method of investing Indirect way of participating in the real estate market, without having to manage it yourself, the REIT company manage it for you Relatively stable
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