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The Stock Market Game Program
A classroom activity for students
grades 4 - 12
Investment Basics
Stock Market
IQ Quiz
Investment Basics
True or False
1. Stocks are items found in the
storeroom of a grocery store.
2. Only rich people invest in the stock
market.
3. Most stocks on the stock market are
sold by the United States
Government.
4. If the stock market goes up 30
percent one year, it will fall by 30
percent in the next year.
Investment Basics
5. Any stock that goes up in price must
eventually come back down.
6. Bears, Bulls, and Pigs are found in the
stock market.
7. Stock prices are set by the Securities
and Exchange Commission, a regulatory
agency of the U.S. government.
8. Stock markets are open on business
days around the clock, around the
world.
Investment Basics
9.
Sometimes companies buy their own
stocks on the stock market.
10. It is hard to buy a good stock today
because all the good ones have already
been purchased.
11. Buying stocks is a sure way to make
money.
12. Corporations sell new issues of stock
on the New York Stock Exchange.
Investment Basics
13. “Insider” stock trading means that
trading stocks takes place inside a
building.
14. People can buy stocks on the internet.
15. When the stock market goes up, it
causes the economy to grow.
From Learning from the Market, © National
Council on Economic Education, New York,
NY
Stock Market
Game Basics
SMG Basics
 The game runs for ten weeks in the
Fall and ten weeks in the Spring
 Each team begins with a
hypothetical $100,000
 Teams may buy, sell, short sell, or
short cover their stocks
SMG Basics
 Teams should have three to five
players
 Only common stocks listed on the
American, New York, and NASDAQ
Stock Exchanges may be traded
 Mutual funds may be traded
 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.
SMG Basics
 A 2% brokers fee is charged for each
transaction
 Stocks valued at less than $5.00 per share
may not be bought
 Teams may borrow up to $100,000 to
purchase stocks on margin -- interest is
charged
SMG Basics
 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
How Does the
Competition
Work?
Teams compete within
a geographic region
and on six levels
Rules of the
Stock Market Game
SMG Rules
 Teams need 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
SMG Rules
 Stock splits and cash dividends are
automatically computed into team
portfolios
 5% interest is earned on cash balance
 Portfolios are updated and available on
a daily basis
 Rankings are updated every weekend
 Stock ticker symbols are used and can
be 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.
General
In formation
General Information
Buying:
 Must be for a minimum of 100
shares
 Must have a closing price of at least
$5.00 per share
 May set a maximum purchase price
limit
General Information
Selling:
 Must already own the stock
 Must be for a minimum of 100
shares (unless selling the only
remaining shares)
ex: If you bought 120 shares, then sold 100,
you may then sell the remaining 20.
 May set a minimum selling price
limit
General Information
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 Information
Short Covering:
 Must have already short sold the
stock
 May set a maximum price limit
 All other rules for selling apply
General Information
Example: Short Selling and Covering
I feel that IBM stock is going to go
down and want to short sell the
stock.
 I am borrowing the stock from the
broker (2% brokerage fee) and
selling it. Now I’ve got cash.
General Information
Example: Short Selling and Covering

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.
General Information
Long Positions:
A Long Position is a stock you
own.
Ex: If a team owns 100 shares of
McDonalds, their long position
is 100 shares.
# of shares
X current price per share
= Value of Long Position
General Information
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
General Information
Equity:
Total Value of Long and
Short Positions
+ Cash Balance
= Equity
General Information
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 = 50%
Borrowing on Margin
 50% of value of long and short position
is required as collateral (margin
requirement)
 Margin requirement is subtracted from
Equity
 Remainder is matched dollar for dollar
for total buying power
Playing the
Stock Market Game
Online Demo
Investment
Basics
Investment Basics
The Difference Between Stocks, Bonds, and
Mutual Funds
Stocks:
You own a piece of the company
You make money if the company does well
Bonds:
You loan money to a corporation or government
You earn the interest
Mutual Funds:
You own one portion of a collection of stocks,
bonds, or other securities
Investment Basics
Different Types of Investments:
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Insured Savings Accounts
Savings Bonds
Certificates of Deposit
Treasury Bonds
Corporate Bonds
Mutual Funds
Stocks
Collectibles
Commodities
Investment Basics
The RISK to RETURN
Relationship:
The RISKIER the
Investment The HIGHER the
Return
Investment Basics
The Three Main Markets:
NYSE:
New York Stock Exchange Oldest, largest,
best-known stocks
NASDAQ: Large, mid-sized, and small growth
companies
AMEX:
American Stock Exchange Mid-sized growth
companies
Investment Basics
Common Stocks:
 Pay dividends based on performance of
the company
 Have higher risk but may have higher
reward
Preferred Stocks:
 Dividend amount is preset
 Dividends are paid on preferred stocks
before common stocks
 Have lower risk but may limit reward
Investment Basics
Stock Splits:
 More shares are created at a lower
price per share
 Stockholders profit if stocks go up
 Indicated with an (s) in the paper
Ex: Dell $109  $54
Investment Basics
The Difference Between Large and
Small Companies:
Large:
 Often have high prices
 Low risk of failure
 Usually pay regular dividends
Small:
 Potential for growth is greater than for
larger companies
 Generally prices are lower
Investment Basics
Other Terminology:
Blue Chips
the largest and most
profitable stocks
Bull Market
a market that is rising
Bear Market
a market that is falling
Investment Basics
Why long term
investing is the
best route?
Investment Basics
What stocks should I buy?
PE Ratio
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Price-to-earnings ratio.
Earnings = earnings per share or firm
profit divided by number of shares.
More earnings per share given stock
price results in a lower PE ratio and a
better buy.
Find PE ratios in the newspaper.
Where to get more information
American Stock Exchange- www.amex.com
NASDAQ- www.nasdaq.com
NYSE- www.nyse.com
Moneycentral.msn.com
CNNfn- www.cnnfn.com
CNBC- www.cnbc.com
EDGAR Database of Corporate Informationwww.sec.gov/edgarhp.htm
 Yahoo! Finance- http://finance.yahoo.com
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