Common Stock, Preferred Stock, and IPO
1. What is the maximum return you can earn by purchasing common? What is the minimum return you can make?
2. What are the maximum and minimum returns on a preferred stock investment?
3. What is an IPO and who gets the money raised in an IPO?
4. Who gets paid when you buy common shares of stock online?
5. Rank common stock, preferred stock, and IPOs in order of risk. Explain your decision.
6. Why would you want to invest in more than one stock at a time?
7. You hear the following statement on the news: “You lose a little money every time you trade.” What does this describe?
8. Company B has invested an enormous amount of money in environmentally responsible projects and reducing its own pollution. Company C has decided that they will only reconsider their environmental impact if one of their practices is illegal. Which company would you invest in? Why?
Basic Option Trading Strategies
9. What is the covered-call strategy? What type of investment vehicle is the covered-call strategy similar to? Draw a picture and explain your reasoning.
10. Find three options strategies that could be useful if you think that markets will move a lot, but you are not sure if they will move up or down. Explain each one and draw them below.