what is the stock market game?
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What is the What is the Stock Market Stock Market Game?Game?
The Stock Market Game™ (SMG) is an on-line simulation of Wall Street trading that provides a framework for teaching students about the American economic system.
The SMG is designed specifically for classroom use to help students understand the stock market, the costs and benefits of investing, the sources and uses of capital, profit and loss, and many other related economic concepts.
What Teachers like about SMGWhat Teachers like about SMG
generates enthusiasm in hard-to-motivate students
helps meet educational standards across many required disciplines
combines the spirit of competition with learning
promotes cooperation and group autonomy among students
creates interest in current events teaches economic concepts sharpens skills in mathematics incorporates easily into most classes Is FUN!
What Teachers like about SMGWhat Teachers like about SMG
Started in the late 1970’s by a University of Buffalo professor
Over 750,000 students compete nationally each year and over 40,000 students in Pennsylvania compete each year
Nationally sponsored by the Foundation for Investor Education
History of the GameHistory of the Game
EconomicsPennsylvaniaEconomicsPennsylvania is the is the
licensed distributor of the Stock licensed distributor of the Stock
Market Game Program in PA.Market Game Program in PA.
Stock Stock MarketMarket
Game Game BasicsBasics
Available games: 3 ten week periods o Fall - October – December o Spring – February - April o Late Spring – Mid March -
May one year long game
Each team begins with a hypothetical $100,000.
Teams may buy, sell, short sell, or short cover their stocks.
Teams should have three to five players.
Common stocks listed on the American, New York, and NASDAQ Stock Exchanges may be traded.
Mutual Funds and Bonds may also be traded.
Mutual Funds:
Closed-ended funds may be traded just like the stocks traded on the NYSE, NASDAQ and American Stock Exchanges.
Open-ended mutual funds can also be traded but cannot be short sold or short covered.
Bonds:
8,000 available
Corporate
Municipal (state only)
Treasury
A 2% brokers fee is charged for each transaction
5% interest is earned on cash balance.
Stocks and mutual funds valued at less than $5.00 per share may not be bought.
Teams may borrow up to $100,000 to purchase stocks on margin – 7% interest is charged
The team with the highest portfolio equity at the end of the game wins.
Portfolios are not liquidated at the end of the game.
Portfolio equity in the tenth week is used for final rankings.
SMG BasicsSMG Basics
How Does How Does the the Competition Competition Work?Work?
Fall, Spring and Late Spring 10 week games: teams compete within a geographic region and on six levels
Year long game: teams statewide compete on six levels
Grades 4-6 Grades 7-8 Grades 9-12 Post-Secondary Youth Groups Adult
SMG LevelsSMG Levels
Trading in the Trading in the Stock Market Stock Market GameGame
Advisors need a working Email address and Internet access to play
Transactions are made at the SMG WorldWide site at: www.smgww.org or http://stockmarketgame.org/ login.html
SMG of PA operates on ‘real time’ trading
Trades are processed within 15 – 20 minutes
Stock and mutual fund dividends, stock splits, and bond interest payments are automatically computed into team portfolios
Portfolios are updated overnight and available on a daily basis
Rankings are updated every weekend
Stock and mutual fund ticker symbols are used and can be looked up on the game pages
Bond numbers assigned by the game are looked up on the game pages
Trades entered after 4:00 p.m. will be processed at 9:35 a.m. the following day.
ROGUE STOCK RULE – If a stock has not been traded for seven days it will not be accepted and will not be permitted to be traded even though it is on the three major stock exchanges.
Sample Bond NumberSample Bond Number
AXXXX.YYNN.N
Seq #T M or CMaturity Year
Annual interest rate
TreasuryMunicipalCorporate
Buying stocks and mutual Buying stocks and mutual funds:funds:
must be for a minimum of 100 shares
must have a price of at least $5.00 per share
may set a maximum purchase price limit for stocks
Buying Bonds:Buying Bonds: Maturity dates no shorter than 5 years Trade in “Real Time” May not be short sold Daily feed of pricing from S&P using
previous day’s price’s Bonds are priced per $100 of bond
principal.
A $4,000 bond with a price of $99.50/$100 will cost you:
(40 x 99.50 = $3,980) + accrued interest + commission)
Selling assets:Selling assets:
Must already own the asset (stock, mutual fund or bond)
Stock and mutual fund sell orders for less than 100 are permitted.
May set a minimum selling price limit for stocks
For all Bond Sell Transactions the SEC Fee of 5.6 cents per $10,000 trading amount is always added.
Please Note:
For real time trading price limits are generally not needed except for trades entered after the market close.
Short Selling:Short Selling: Short selling starts with
borrowing a stock from your broker
You sell the borrowed stock hoping to buy it back at a lower price and return (short cover) it to your broker for a profit
All rules for buying still apply
General InformationGeneral Information
Short Covering:Short Covering: Must have already short sold
the stock
May set a maximum price limit
All other rules for selling apply
General InformationGeneral Information
Example: Short Selling and Example: Short Selling and CoveringCoveringExample: Short Selling and Example: Short Selling and CoveringCovering
I am borrowing the stock from the broker (2% brokerage fee) and selling it. Now I’ve got cash.
I feel that IBM stock is going to go down and want to short sell the stock.
When stock price is at its lowest, I short cover by buying the stock back in the stock exchange at the low price and returning it to the broker (2% brokerage fee). I keep what I didn’t spend.
I get the difference between the high price and the low price minus the brokerage fees.
Example: Short Selling and Example: Short Selling and CoveringCoveringExample: Short Selling and Example: Short Selling and CoveringCovering
Note: it’s important to remember that you borrow the stock from a broker and return the stock. You do not give the broker any money.
Long Positions:Long Positions:A Long Position is an asset you
own.
= Value of Long Stocks
# of shares
X current price per share
Stocks:Stocks:
Uses the previous day's closing price. Note: Nearly all funds compute their NAVs (Net Asset Value or price per share) once a day at the end of the day based on the value of the securities in their portfolios.
Mutual Funds:Mutual Funds:
= Value of Mutual Funds Long Position
# of shares
X current price per share
Per $100 of bond principal
Bonds:Bonds:
= Value of Bonds Long Position
$ value
X price per $100
Short Positions:Short Positions:
A Short Position is a stock you borrowed from the broker and sold
# of shares
X current price per share
= Value of Short Position
Equity:Equity: Total Value of Long Position Stocks Mutual Funds Treasury/Municipal/Corporate
Bonds
+ Cash Balance
= Equity
Buying on Margin:Buying on Margin:
You may borrow funds using the stock in your portfolio as collateral for the loan
Interest charged at 7%
Initial margin requirement is subtracted from equity
Remainder is matched dollar for dollar for total buying power
Formula for Initial Margin Formula for Initial Margin RequirementRequirement 50% of Stocks (long & short
position) & mutual funds
40% of Treasury Bonds
10% of Municipal Bonds
25% of Corporate bonds
$What’s What’s the cost the cost to play the to play the game?game?
Team Fees: 10 Week Games:Grades 4-12 $15
College $15
Youth Groups $18
Adult $25
Team Fees: Year Long Game:All groups $25
SMG CostsSMG Costs
Teacher Resource Packet Teacher Resource Packet available for purchase ($40):available for purchase ($40):Beyond the MarketYour Guide to Understanding Investing Market Mechanics CD RomClassroom materials
Send check to SMGofPA123 Market StreetSelinsgrove PA 17870(Note SMG Teacher Packet on check)
