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Category: Market jargons
  1. What is long? What is short(katek)?
  2. What is averaging down?
  3. What are bonds and bills?
  4. What are warrants and CFD?
  5. What's XD, CD? Do I get dividends if I buy on XD?
  6. What are rights shares?
  7. What is force key? I see that option when I'm getting my orders keyed in.
  8. What are odd lots? Can I sell odd lots?
  9. What is pre-open and pre-close?
  10. What is CE and XE? What is cash distribution?
  11. What is BB? I keep seeing people saying BBs are buying/selling.
  12. What is shares splitting and what are its implication?
  13. Why do company carry out shares splitting?



  1. What is long? What is short(katek)?
    Longing a stock means we buy a stock, wait for the price to move up to sell again to pocket the difference. Shorting a stock means we sell a stock first, wait for the price to move down, then buy it back again to 'cover the short position', thereby pocketing the difference. How come we can do such things - selling something that we dun have?

    The reason is because of 'contra'. Basically it just means that it takes some time for the stock you buy or sell to be delivered to your central deposit account (CDP), so if we sell or buy before it's delivered we don't have to pay for anything. Usually contra period is T+3, meaning the day you transacted (T) + another 3 market days. So if I buy a share and sell it all within T+3, I don't have to make any payment and can pocket the difference. Be careful about buying things you can't afford to pay. If you can only buy $1000 worth of stocks and you bust that limit and buy all the stocks your trading limit allows (say $50,000) on contra (meaning that you have no intention to pay and die die have to sell by T+3), you are either skillful or just very optimistic in the face of death.



    Shorting, on the other hand, doesn't work on T+3, take note!! We have to cover our position by the end of the day (T+0), otherwise SGX will buy back for you.

    Category: Market jargons
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  2. What is averaging down?
    This is a method to lower down the average buy price so as to be able to get out of it IF it rebounds at lower price. An example will do the trick.

    Suppose I bought a stock, 10 lots at 0.770. The price subsequently tanked and I held on, thinking that it is temporarily. But it tanked to 0.600, a 22% drop in price. For it to rise back to 0.770 (ignore brokerage for simplicity), it has to rise up 28%, which is even harder. So I buy in more to 'average down' my buy in price.



    So when it reached 0.600, I bought 10 lots at 0.600...tanked down further Bought it 5 lots more at 0.550.



    My weighted average buy price is 0.658 [ (10x0.770 + 10x0.600 + 5x0.550)/(10+10+5)]. If the price rebound slightly and hit 0.660 (assuming no brokerage), I can break even and sell already, instead of waiting to sell at 0.770.



    The risk? You are throwing money into a sinking ship. It might sink and sink and never recover. Do this only if you're sure why the stock is sinking. Otherwise you're just digging deeper in your own grave. Most pple prefer averaging up - if the stock is performing as you expect, then you throw in more funds. Whatever you choose, just know what you're doing and the risks involved.

    Category: Market jargons
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  3. What are bonds and bills?
    Bond/bills

    A debt investment with which the investor loans money to an entity (company or government) that borrows the funds for a defined period of time at a specified interest rate.



    The indebted entity issues investors a certificate, or bond, that states the interest rate (coupon rate) that will be paid and when the loaned funds are to be returned (maturity date). Interest on bonds is usually paid every six months (semiannually). The main types of bonds are the corporate bond, the municipal bond, the Treasury bond, the Treasury note, the Treasury bill and the zero-coupon bond.



    The higher rate of return the bond offers, the more risky the investment. There have been instances of companies failing to pay back the bond (default), so, to entice investors, most corporate bonds will offer a higher return than a government bond. It is important for investors to research a bond just as they would a stock or mutual fund. The bond rating will help in deciphering the default risk.



    A bill is just a shorter term version of bonds. In Singapore, bill is anything less than or equal to 1 yr while bonds are more than 1 yr, like 1,2,5,7,15 and 20yr bonds.



    Check this website out to find the difference in prices and yields.

    Category: Market jargons
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  4. What are warrants and CFD?
    Warrant



    A derivative security that gives the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue as a "sweetener" to entice investors.



    The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months.



    Basically, call warrants means that you want the price of the underlying to go up. If the underlying goes up, the call warrants will also rise in price. Put warrants means you want the price of the underlying to go down and it will rise in price if the underlying goes down.



    Can read this website for more information on the basic of warrants
    e.g. IV, delta, strike, settlement, expiry.



    Contract For Difference - CFD



    An arrangement made in a futures contract whereby differences in settlement are made through cash payments, rather than the delivery of physical goods or securities.



    This is generally an easier method of settlement because losses and gains are paid in cash. CFDs provide investors with the all the benefits and risks of owning a security without actually owning it.

    Category: Market jargons
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  5. What's XD, CD? Do I get dividends if I buy on XD?
    When a stock wants to give dividend, it will put a CD - cum dividend remark. This means anyone who buys now or owns the stock already, will be entitled to get dividends by the time the stock closes its book. XD stands for ex-dividend. If you buy the stocks on XD, it will be too late to reach the registrar so your name will not be in the company's book - so you'll not be entitled to dividends. To make it really simple:

    a. If you buy on or before CD, you'll get dividends



    b. If you sell on or before CD, you won't get dividneds



    c. If you buy on or after XD, you won't get dividends (the seller gets it)



    d. If you sell on or after XD, you'll get dividends (the buyer won't get it)



    Don't worry about record date or book closure date, it's none of our concern. Just worry about CD/XD will do. Oh, and of cos the payment date.

    Category: Market jargons
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  6. What are rights shares?
    Cash-strapped companies can turn to rights issues to raise money when they really need it. In these rights offerings, companies grant shareholders a chance to buy new shares at a discount to the current trading price. Let's look at how rights issue work, and what they mean for all shareholders.

    Defining a Rights Issue and Why It's Used



    A rights issue is an invitation to existing shareholders to purchase additional new shares in the company. More specifically, this type of issue gives existing shareholders securities called "rights", which, well, give the shareholders the right to purchase new shares at a discount to the market price on a stated future date. The company is giving shareholders a chance to increase their exposure to the stock at a discount price.



    But until the date at which the new shares can be purchased, shareholders may trade the rights on the market the same way they would trade ordinary shares. The rights issued to a shareholder have a value, thus compensating current shareholders for the future dilution of their existing shares' value.



    There's more to this, pls click on this site to get the full picture as the writeup is too long for this FAQ. It's question 11.

    Category: Market jargons
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  7. What is force key? I see that option when I'm getting my orders keyed in.
    When buying or selling, you can only key in within 6 bids of the current price. Different price range have different bid size.

    So, if a stock is currently trading at say 1.50, you can only sell up to 1.56 or buy up to 1.44 (within 6 bids, each bid being 1 cent). If you need to go beyond, you need to check the 'force-key' option. Some brokerage firm have free force keys, some are subscription based.



    Take note that on 24th Dec 2007, SGX will revise a new minimum bids with increased forced key orders. The bid size is reduced according to this:



    For stocks:


    1. Below S$1, bid size is 0.005

    2. S$1 - S$9.99, bid size is 0.01

    3. S$10 and above, bid size is 0.02

    4. Forced key orders for stocks is +/- 10 bids.


    For all ETF


    1. Bid size is 0.01 or 0.001 as determined by SGX-ST

    2. Forced key order is +/- 30 bids
    Category: Market jargons
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  8. What are odd lots? Can I sell odd lots?
    Usually, each lot size in SGX shares consists of 1000 shares. There are some exceptions, for example the STI ETF 100 shares, you can buy at 100 shares per lot instead of the usual 1000 shares per lot. How do we get odd lots? Usually through corporate actions like rights or entitlement, script dividend. For simplification, I assume all shares have a lot size of 1000 shares here.

    Since you can only buy or sell a minimum of l lot, there is some problem if you want to buy/sell less than 1 lot, like 800 shares. These are called odd lots, and they can’t be transacted in the normal markets.



    I know that for poems, there is a unit shares market – specifically used to buy/sell odd lots. But take note – due to the liquidity (or rather the lack of), expect to sell your odd lots below market price and buy odd lots (to top up to 1 full lot) at a discount. This mean you can buy 1 share of DBS at $20 plus dollars if you so wished.

    Category: Market jargons
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  9. What is pre-open and pre-close?
    Pre-Open' Routine
    It is a 30-minute session before regular trading starts at 0900 hrs. It comprises the 'Pre-Open Period' and the 'Non-Cancel Period'.


    During the 'Pre-Open Period' (0830 to 0859 hrs), buy and sell orders can be entered, amended or withdrawn. They will not be matched and executed during this period. The 'Non-Cancel Period' is between 0859 to 0900 hrs, during which input, amendment and withdrawal of orders are not permitted. Orders that are matched are executed at a single computed price, which will be the same as or better than the price at which the orders are entered. This computed price shall be the opening price for the day. Unmatched orders will be carried forward into the regular trading session.



    'Pre-close' Routine


    At 1700 hrs, all unmatched orders are carried forward to the Pre-Close Routine, which runs for 6 minutes and consists of a 'Pre-Close Period' and a 'Non-Cancel Period'.
    Category: Market jargons
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  10. What is CE and XE? What is cash distribution?
    CE means cum-entitlement. This means that the company is going to distribute cash to shareholders as a result of:

    a. Delisting – so all the shares held by shareholders will be ‘bought’ back by them with the cash returned to the shareholders



    b. Shares cancellation – this is to reduce the number of shares outstanding. They will announce a ratio, say 1 out of every 12 shares will be cancelled at $0.50. So, if you’re holding 6000 shares, 500 shares will be cancelled so you’ll get back $250 (500 x 0.50) with 5500 shares remaining (6000 – 500).



    To qualify for entitlement, you need to have shares before or on CE. This means that if the stock went XE (ex-entitlement) and you went to buy it, you won’t get the cash distribution due to the entitlement.

    Category: Market jargons
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  11. What is BB? I keep seeing people saying BBs are buying/selling.
    BB stands for a lot of things - chng kay, big boys, big brothers etc. Basically they refer to institutional players like fund managers, brokerage house like JP morgan, Merrill lynch, hedge funds and others. They are the ones who possess the will and the clout to move the markets that retailers investors like us can't. They are able to do a lot of things to the stocks - drive it up, bring it down, issue reports to buy but sell it etc. Basically, you wouldn't want to bet the other direction from what the BBs are doing - it's suicidal.
    Category: Market jargons
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  12. What is shares splitting and what are its implication?
    All listed companies have a fixed number of shares outstanding. A shares split is when the company increased the number of shares outstanding by issuing more shares to current shareholders. For example, a 2-for-1 split means that a company initially having 30 million shares will end up having 60 million shares.

    There is an ex-date and a record date, which are duly announced beforehand. Normally, the current shareholders will receive the split shares a day after the record date but it is more advisable to check with CDP to confirm that.



    The most direct implication is that the value of the company per share will be diluted. Price per share and key ratios like earnings per share (EPS) will also be changed. Obviously the number of shares outstanding and the par value of each shares will be affected. What will not be changed is the accounts as well as the capital structure of the company (same market capitalization)



    For example, company A has 10 million issued ordinary shares @ par value of $0.50 each (Capital = 5 million). After splitting, it will have 20 million of issued ordinary shares @ par value of $0.25 each (capital is still 5 million). Hence, there will be no change in the capital structure of the company.



    Category: Market jargons
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  13. Why do company carry out shares splitting?
    So why do companies do share splitting?



    1. Sometimes the share prices of the companies have risen too high for retail investors to participate, so a shares splitting is good to lower the price per share to entice investors to jump in.



    Since many small investors think the stock is now more affordable and buy the stock, they end up boosting demand and drive up prices. Another reason for the price increase is that a stock split provides a signal to the market that the company's share price has been increasing and people assume this growth will continue in the future, and again, lift demand and prices. For a good example, look at Chinafish.



    2. Shares splitting is good for illiquid stocks with very low floating shares. This can affect the reflection of the company. Basically it's to increase the liquidity of the company. For an example, look at Ezion.



    (Courtesy of Jeng)

    Category: Market jargons
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