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do an spv s assets and liabilities appear on the parent company s balance sheet | no special purpose vehicles have their own obligations assets and liabilities outside the parent company spvs can issue bonds to raise additional capital at more favorable borrowing rates than the parent could they also create a benefit by achieving off balance sheet treatment for tax and financial reporting purposes for a parent company | |
what are the mechanics of an spv | the spv itself acts as an affiliate of a parent corporation that sells assets off of its own balance sheet to the spv the spv becomes an indirect source of financing for the original corporation by attracting independent equity investors to help purchase debt obligations this is most useful for large credit risk items such as subprime mortgage loans not all spvs are structured the same way spvs are often limited liability companies llcs in the united states the llc normally groups the assets into tranches and sells them to meet the specific credit risk preferences of investors after it purchases the risky assets from the parent company | |
why would a company form an spv | spvs are created for several reasons they provide protection for a parent company s assets and liabilities as well as protection against bankruptcy and insolvency these entities can also provide an easy way to raise capital spvs have more operational freedom because they aren t burdened with as many regulations as the parent company | |
what is the function of spvs in public private partnerships | public private partnerships are collaborations between a government agency and a privately owned company many private partners in public private partnerships demand a special purpose vehicle as part of the arrangement this is especially true for capital intensive endeavors such as infrastructure projects the private company might not want to take on too much financial exposure so an spv is created to absorb some of the risks the bottom linea special purpose vehicle is a subsidiary created by a parent company for a variety of purposes the spv can be used to isolate financial risk securitize assets and perform separate financial transactions spvs have been used in the past to alter company financials and misrepresent their financial health it s critical to analyze spvs along with other aspects of a company s financial statements before making any investments | |
what is a special warranty deed | a special warranty deed is a deed to real estate where the seller of the property known as the grantor warrants only against anything that occurred during their physical ownership in other words the grantor doesn t guarantee against any defects in clear title that existed before they took possession of the property | |
how a special warranty deed works | special warranty deeds are most commonly used with commercial property transactions single family and other residential property transactions will usually use a general warranty deed many mortgage lenders insist upon the use of the general warranty deed special warranty deeds go by many names in different states including covenant deed grant deed and limited warranty deed the guarantee covers only the period when the seller held title to the property with a special warranty deed special warranty deeds do not protect against mistakes in a free and clear title that may exist before the seller s ownership thus the grantor of a special warranty deed is only liable for debts problems or other encumbrances to the title that they caused during their property ownership the grantee assumes responsibility for any issues that arise from the previous owners general warranty deeda warranty deed provides the transfer of ownership or title to commercial or residential real estate property and comes with certain guarantees made by the seller these guarantees include that the property title is being transferred free and clear of ownership claims outstanding liens or mortgages or other encumbrances by individuals or entities other than the seller a general warranty deed covers the property s entire history and guarantees that the property is free and clear from defects or encumbrances whether they happened or under whose ownership the general warranty deed assures the buyer that they are obtaining full ownership rights without valid potential legal issues with the title the general warranty deed is the most common and preferred type of instrument used to transfer real estate titles in the united states special warranty deed vs general warranty deeda special warranty deed also known as a limited warranty deed is a variation of the general warranty deed while the word special may communicate to a buyer the idea that the deed is of higher quality the special warranty deed is less comprehensive it offers less protection due to the limited time frame it covers in residential property special warranty deeds are frequently used in foreclosures and the forced sale of the property to satisfy a debt as an example imagine a home that has had two previous owners before you the first owner was a hoarder and soon the house and yard fell into disrepair the city s code enforcement department issued fines against the owner which were attached to the property the owner fell behind on their mortgage and the bank foreclosed selling the home to the second owner to the pleasure of the neighborhood the new owner fixed the house and cleaned the yard after 10 years they put the home on the market and you buy it using a special warranty deed a few years later you decide to sell the house however because the code enforcement liens remain against the property they could encumber your sale at the very least you will need to satisfy the city s lien to free the title similarities between general warranty deeds and special warranty deedsboth the general and special warranty deeds identify special warranties allow the transfer of property title between seller and buyer the purchase of title insurance can mitigate the risk of prior claims to the special warranty deed it is useful for buying a house in foreclosure special warranty deeds provide narrow protection for the grantees or buyers special warranty deeds cover only the period of ownership of the grantor or seller special warranty deeds are not often used for residential properties example of special warranty deedalthough general warranty deeds are more common in residential real estate transactions there is one area where the special warranty deed becomes the norm this is for foreclosed properties real estate owned reo or short sold properties most fannie mae federal national mortgage association or fnma housing and urban development hud and bank owned residences sell using this sort of deed perhaps one primary reason for the use of special warranty deeds is because the selling authority has no wish to be liable for any situation concerning the property before the seizure for example in 2012 a couple with a home in grenada county mississippi defaulted on the loan payments on the property in february 2013 the property was foreclosed upon by their lender wells fargo bank subsequent legal documents indicated that wells fargo conveyed the property to fnma in a special warranty deed 1special considerationsmost times a title search will uncover any liens or claims to the title of a property a title search is a review of available public records to determine the ownership of property attorneys title companies and individuals can complete title searches to verify ownership of property while these searches are extensive there is always the possibility that something will be missed for this reason most buyers regardless of the type of warranty deed they use also purchase title insurance when buying a property title insurance is an indemnity insurance policy that protects a buyer from financial claims against the title of a property they own | |
what is a special warranty deed used for | if you are involved in a commercial property transaction you will most likely need to use a special warranty deed | |
what is a general warranty deed | if you are purchasing a home or other type of residential property you will usually use a general warranty deed for your transaction with your mortgage lender | |
what are other names for a special warranty deed | covenant deed grant deed and limited warranty deed are all different names used by the real estate industry for special warranty deed the bottom linea special warranty deed is a deed in which the seller of a piece of property the grantor only warrants against problems or encumbrances in the property title that occurred during their ownership the grantor doesn t guarantee against any defects in clear title that existed before they took possession of the property | |
what is specialization | specialization is a method of production whereby an entity focuses on the production of a limited scope of goods to gain a greater degree of efficiency many countries for example specialize in producing the goods and services that are native to their part of the world and they trade them for other goods and services this specialization is thus the basis of global trade as few countries have enough production capacity to be completely self sustaining understanding specializationspecialization is an agreement within a community organization or larger group in which each of the members best suited for a specific activity assumes responsibility for its successful execution specialization can occur on both the microeconomic level and the macroeconomic levels at the individual level specialization usually comes in the form of career or labor specialization each member of an organization or economy for example has a unique set of talents abilities skills and interests that make her uniquely able to perform a set of tasks 1labor specialization exploits these unique talents and places people in areas where they perform the best helping both the individual as well as the overall economy 1if for example a single individual excels at math but is not a proficient writer it benefits both the individual and the community if she pursues a field that relies heavily on mathematics using another example specialization can even refer to the production capacity of an individual firm when setting up a factory an assembly line is organized to increase efficiency rather than producing the entire product at one production station specialization involves focusing on a specific skill activity or production process such as a south american company harvesting bananas to become the leader or expert economies that realize specialization have a comparative advantage in the production of a good or service comparative advantage refers to the ability to produce a good or service at a lower marginal cost and opportunity cost than another good or service 1 | |
when an economy can specialize in production it benefits from international trade 1 if for example a country can produce bananas at a lower cost than oranges it can choose to specialize and dedicate all its resources to the production of bananas using some of them to trade for oranges | specialization also occurs within a country s borders as is the case with the united states for example citrus goods grow better in the warmer climate of the south and west 2 many grain products come from the farms of the midwest 3 and maple syrup comes from the maple trees of new england 4 all these areas focus on the production of these specific goods and they trade or purchase other goods | |
what is speculation | in the world of finance speculation or speculative trading refers to the act of conducting a financial transaction that has substantial risk of losing value but also holds the expectation of a significant gain or other major value with speculation the risk of loss is more than offset by the possibility of a substantial gain or other recompense an investor who purchases a speculative investment is likely focused on price fluctuations while the risk associated with the investment is high the investor is typically more concerned about generating a profit based on market value changes for that investment than on long term investing when speculative investing involves the purchase of a foreign currency it is known as currency speculation in this scenario an investor buys a currency in an effort to later sell that currency at an appreciated rate as opposed to an investor who buys a currency in order to pay for an import or to finance a foreign investment without the prospect of substantial gains there would be little motivation to engage in speculation it may sometimes be difficult to distinguish between speculation and simple investment forcing the market player to consider whether speculation or investment depends on factors that measure the nature of the asset expected duration of the holding period and or amount of leverage applied to the exposure investopedia michela buttignol | |
how does speculation work | for example real estate can blur the line between investment and speculation when buying property with the intention of renting it out while this would qualify as investing buying multiple condominiums with minimal down payments for the purpose of reselling them quickly at a profit would undoubtedly be regarded as speculation speculators can provide market liquidity and narrow the bid ask spread enabling producers to hedge price risk efficiently speculative short selling may also keep rampant bullishness in check and prevent the formation of asset price bubbles through betting against successful outcomes mutual funds and hedge funds often engage in speculation in the foreign exchange markets as well as bond and stock markets speculation and the forex marketforex markets execute the world s highest total volume and dollar value with an estimated 7 5 trillion per day changing hands between buyers and sellers 1 this market trades around the world for 24 hours a day while positions can be taken and reversed in seconds utilizing high speed electronic trading platforms transactions typically feature spot deals to buy and sell currency pairs such as eur usd euro us dollar for delivery through options or simple exchange this market is dominated by asset managers and hedge funds with multi billion dollar portfolios speculation in the forex markets can be hard to differentiate from typical hedging practices which occur when a company or financial institution buys or sells a currency to hedge against market movements for example a sale of foreign currency related to a bond purchase can be deemed either a hedge of the bond s value or common speculation these relationships can get complicated to define if the currency position is bought and sold multiple times while the fund owns the underlying bond speculation and the bond marketthe global bond market is valued at over 133 trillion of which approximately 51 trillion is based in the united states and these assets may include debt issued by governments and multinational corporations 2 asset prices can fluctuate greatly and are strongly influenced by interest rate movement as well as political and economic uncertainties the largest single world market trades u s treasuries with prices in that venue often driven by common speculation speculation and equitiesspeculative trading is a major part of the stock market accounting for a significant portion of the daily trading volume it usually involves buying and selling stocks to profit from short term price fluctuations rather than focusing on the long term fundamental value of a company this approach often relies on technical analysis market trends and real time news to identify potential opportunities while speculative trading in equities can offer significant profit potential it alsocarries substantial risks due to market volatility and the unpredictable nature of price movements | |
is speculative trading only for professionals | speculative trading is not exclusively for professionals but it does require a certain level of knowledge and experience to navigate effectively both amateurs and professional traders can engage in speculative trading but it s essential to understand the risks involved and have a solid strategy in place before diving into speculative trading it s crucial to educate yourself on market trends technical analysis and risk management always remember that speculative trading can be highly volatile and it s essential to approach it with caution regardless of your experience level | |
is day trading considered speculation | yes day trading is considered a form of speculation day trading involves buying and selling financial instruments such as stocks currencies or commodities within the same trading day with the aim of profiting from short term price fluctuations day traders typically close all their positions before the market closes to avoid overnight risks since day trading focuses on short term market movements rather than long term fundamental value it is considered speculative in nature it s important to note that day trading carries significant risks and requires a high level of discipline knowledge and experience | |
has there been an increase in speculative trading in recent years | yes there has been an increase in speculative trading in recent years several factors have contributed to this growth | |
what is a speculator | a speculator utilizes strategies and typically a shorter time frame in an attempt to outperform traditional longer term investors speculators take on risk especially with respect to anticipating future price movements hoping to make large gains to offset the risk speculators exert control over long term risks by employing various strategies such as position sizing stop loss orders and monitoring the statistics of their trading performance speculators are typically sophisticated risk taking individuals with expertise in the markets in which they are trading understanding speculatorsspeculators attempt to predict price changes and extract profit from the price moves in an asset they may utilize leverage to magnify returns and losses although this is a personal choice of the individual there are different types of speculators in a market for example individual traders can be speculators if they purchase financial instruments for short periods of time with the intention of profiting from their price changes market makers can also be considered speculators because they take the opposite position to market participants and profit from the difference in bid and ask spreads prop shops or proprietary trading firms can also be considered speculators because they use leverage to purchase securities and make profits from changes in their prices normally speculators operate in a shorter time frame than traditional investors for example a person may call themself an investor if they buy 20 strong companies and plan to hold those stocks for at least 10 years assuming the companies continue to perform well a speculator on the other hand may use all their portfolio capital to buy five stocks or several futures contracts expecting them to rise over the next few days weeks or months speculators typically utilize trading strategies that tell them when to buy when to sell at a loss or profit and how big of a position to take principles behind speculationspeculation sometimes gets confused with gambling there is an important distinction though if a trader is using untested methods to trade often based on hunches or feelings it is highly likely they are gambling if gambling the trader is likely to lose over the long run profitable speculation takes a lot of work and with proper strategies it is possible to gain a reliable edge in the marketplace profitable speculators look for repeating patterns in the marketplace they look for commonalities between many rising and falling prices in an attempt to use that information to profit from future ups and downs in prices it is detailed work and because prices are always moving and there are nearly infinite variables to consider each speculator often develops their own unique way of trading speculators impact on the marketif a speculator believes that a particular asset is going to increase in value they may choose to purchase as much of the asset as possible this activity based on the perceived increase in demand drives up the price of the particular asset if this activity is seen across the market as a positive sign it may cause other traders to purchase the asset as well further elevating the price this can result in a speculative bubble where the speculator activity has driven the price of an asset above its true value the same can be seen in reverse if a speculator believes a downward trend is on the horizon or that an asset is currently overpriced they sell as much of the asset as possible while prices are higher this act begins to lower the price of the asset if other traders act similarly the price will continue to fall until the activity in the market stabilizes in this way even many investors become speculators from time to time they get caught up in the frenzy of the big ups and downs while they may have initiated their position with the intention of being long term investors if they start to buy and sell solely because they think other people are buying or selling they have entered the realm of speculation possibly even gambling if they are unsure of what they are doing as opposed to investing | |
what is a speculative investment | a speculative investment is one where an investor seeks to profit from a rapid change in an asset s price the investment time frame is short and usually comes with high risk speculative investments can be made in all financial markets such as stocks and foreign exchange as well as in art and collectibles | |
what is the difference between a speculator and an investor | investors take a more pragmatic and methodical process in choosing investments typically with a medium to low level of risk with a long time horizon speculators seek to quickly gain profits via a rapid change in an asset s price over a short time frame their investment strategies typically come with higher risk | |
is market speculation illegal | market speculation is legal but per regulatory bodies if speculation causes sudden or unreasonable fluctuations or unwarranted changes in the price then limits on speculative trading may be placed by the regulatory body the bottom linespeculators seek to make profits in a short time frame by taking on high levels of risk they stand in contrast to investors who take a more methodical approach to making profits in the markets over a longer period of time while speculators can be profitable their bets can go against them resulting in losses | |
what does spider mean | spider spdr is a short form name for a standard poor s depository receipt an exchange traded fund etf managed by state street global advisors that tracks the standard poor s 500 index s p 500 each share of an spdr contains a 10th of the s p 500 index and trades at roughly a 10th of the dollar value level of the s p 500 spdrs can also refer to the general group of etfs to which the standard poor s depositary receipt belongs 12 | |
how spiders spdrs work | spiders are listed under the ticker symbol spy by trading like stocks spiders have continuous liquidity can be short sold bought on margin provide regular dividend payments and incur regular brokerage commissions when traded spiders are used by large institutions and traders as bets on the overall direction of the market they are also used by individual investors who believe in passive management or index investing in this respect spiders compete directly with s p 500 index funds and provide an alternative to traditional mutual fund investment spdrs can be purchased and sold through a brokerage account meaning that strategies that use stop losses and limit orders can be implemented spdrs provide investors with value in much the same way as a mutual fund but they trade like a common equity for example the returns of a spdr is calculated using net asset value nav just like a fund which is derived using the aggregate value of the underlying group of investments the origin of spdr etfsspdrs arrived in 1993 after the securities and exchange commission sec issued a 1988 report faulting automated orders for all index stocks for contributing to the black monday crash of 1987 the report stated that an instrument for trading a basket of stocks at one time could prevent the problem in the future in response the amex and several other organizations developed the spy the original etf launched with 6 53 million in securities and after initial difficulty persuading institutions to purchase the product it soared to 1 billion in three years 3 the size of the global etf market at the end of 2023 has exploded to 11 63 trillion in assets 4examples of spdr etfsinvestors can use spdrs to realize broad diversification to specific portions of the market for example the spdr s p dividend etf is an investment vehicle that seeks to provide investment results that track the total return performance of the s p high yield dividend aristocrats index this means that the spdr s p dividend etf indexes dividend paying stocks that are a part of the s p 500 the etf is made up of a total of 136 companies and tracks performance through its nav which is communicated as a price per share 5however this is not the only spdr that an investor can use to realize a diversified investment in the s p 500 using another real world example investors can invest in spdr s p regional banking etf which is an investment vehicle that reflects the performance of companies within the s p 500 that conduct business as regional banks or thrifts specifically the etf seeks to provide results that match to the total return of the s p regional banks select industry index the etf is comprised of 140 companies in the s p and also derives its value with its nav disseminated as a price per share 6 | |
what is the spillover effect | spillover effect refers to the impact that seemingly unrelated events in one nation can have on the economies of other nations although there are positive spillover effects the term is most commonly applied to the negative impact a domestic event has on other parts of the world recent examples include natural disasters and stock market crises amother other macro events | |
how the spillover effect works | spillover effects are a type of network effect that have increased in prevalence due to globalization in trade and stock markets which deepened financial connections between economies the canada u s trade relationship provides an example of spillover effects this is because the u s is canada s main market by a wide margin across nearly every export oriented sector the effects of a minor u s slowdown are amplified by the canadian reliance on the u s market for its own growth for example if consumer spending in the united states declines it has spillover effects on the economies that depend on the u s as their largest export market the larger an economy is the more spillover effects it is likely to produce across the global economy since the u s is a leader in the global economy nations and markets can be easily swayed by domestic turmoil most of the world experiences significant spillover effects when there is a downturn or macro effect in the world s two largest economies the united states and china since 2009 china has emerged as a major source of spillover effects as well this is because chinese manufacturers have driven much of the global commodity demand growth since 2000 with china becoming the number two economy in the world after the u s the number of countries that experience spillover effects from a chinese slowdown is increasingly significant | |
when china s economy experiences a downturn it has a palpable impact on the worldwide trade in metals energy grains and many more commodities this leads to economic pain through much of the world although it is most acute in eastern europe the middle east and africa as these areas rely on china for a larger percentage of their revenue | special considerationsthere are some countries that experience very few spillover effects in the global market such closed off economies are very rare for instance even north korea an economy nearly sealed off from world trade in 2024 has begun to feel the spillover effects from intermittent chinese slowdowns no matter how strong developed countries are still vulnerable to spillover effects especially stemming from powerful economic phenomena japan the u s and the eurozone for example have all experienced spillover effects from china at some point | |
when global markets get shaky investors might shift their investments from one market to another in an effort to insulate from spillover effects such a shift may lead to positive boosts in those safe haven markets | this effect was seen with the u s investment inflows during the eu s struggles with the greek debt crisis in 2015 when dollars flow into u s treasuries the yield goes down along with the borrowing cost for american homebuyers borrowers and businesses this is an example of a positive spillover effect from the perspective of a u s consumer | |
what is a spillover cost in economics | similar to spillover effects are spillover costs more commonly known as negative externalities a spillover cost is a cost incurred by any third party outside of a transaction without their agreement or without compensation pollution is popularly used to illustrate spillover costs take a livestock production facility for instance while individuals living in proximity to such a facility may not be participants in the agricultural trade they may still bear costs associated with it such as exposure to unpleasant odors or risk of contaminated waterways | |
what causes spillover effects | a wide range of factors and events can lead to spillover effects in fact due to global interconnectedness across economies there are few major phenomena that wouldn t cause spillover effects notable sources of spillover effects include economic downturns supply chain disruptions geopolitical crises and natural disasters | |
what is wage spillover | wage spillover refers to the spillover effects that stem from changes in wages this could involve anything from increased consumer spending inflation fluctuations in employment and variations in local tax revenue the bottom linespillover effects are indirect economic impacts that countries or regions may experience as a consequence of shifts or events elsewhere due to globalization and the interconnectedness of markets it s rare for any economy to be completely insulated from spillover effects for the large part the term is used to refer to negative knock on impacts though spillover effects can also be occasionally positive | |
what is a spinning top candlestick | a spinning top is a candlestick pattern with a short real body that s vertically centered between long upper and lower shadows the candlestick pattern represents indecision about the future direction of the asset it means that neither buyers nor sellers could gain the upper hand a candlestick pattern forms when the buyers push the price up during a given time period and the sellers push the price down during the same time period but ultimately the closing price ended up very close to the open after a strong price advance or decline spinning tops can signal a potential price reversal if the candle that follows confirms a spinning top can have a close above or below the open but the two prices are always close together | |
what does a spinning top candlestick tell you | spinning tops are a sign of indecision in the asset the long upper and lower shadows indicate there wasn t a meaningful change in price between the open and close the bulls sent the price sharply higher and the bears sent the price sharply lower but in the end the price closed near where it opened this indecision can signal more sideways movement especially if the spinning top occurs within an established range it can also signal a possible price reversal if it occurs following a price advance or decline sometimes spinning tops may signal a significant trend change a spinning top that occurs at the top of an uptrend could be a sign that bulls are losing their control and the trend may reverse similarly a spinning top at the bottom of a downtrend could signal that bears are losing control and bulls may take the reins in any case confirmation helps clarify what the spinning top is saying the confirmation comes from the next candle if a trader believes a spinning top after an uptrend could result in a reversal to the downside the candle that follows the spinning top should see prices drop if it doesn t the reversal is not confirmed and the trader will need to wait for another trade signal if the spinning top occurs within a range this indicates indecision is still prevalent and the range will likely continue the candle that follows should confirm meaning it stays within the established sideways channel spinning tops are a common candlestick pattern which means they work best in conjunction with other forms of technical analysis for example traders may look at technical indicators like the moving average convergence divergence macd or relative strength index rsi for signs of a reversal before taking a trade based on a spinning top indicators or other forms of analysis such as identifying support and resistance may aid in making decisions based on candlestick patterns example of a spinning top candlestickthe chart example shows several spinning tops the first one on the left occurs after a small price decline it is followed by a down candle indicating a further price slide the price does head a bit lower but then reverses to the upside if taking trades based on candlesticks this highlights the importance of having a plan and managing risk after the candlestick the second spinning top occurs within a range it confirms the current indecision of the market as the price continues to head sideways the third spinning top is exceptionally large compared to the candles around it it occurred after an advance and was followed by a large down candle this ended up being a reversal candle as the price proceeded lower as the price was dropping another spinning top formed it ends up being a brief pause as the next candle gapped lower and continued falling the examples highlight the importance of confirmation and context spinning tops within ranges typically help confirm the range and the market s indecision spinning tops within trends may be reversals signals but the candle that follows needs to confirm limitations of using the spinning topspinning top candlesticks are common which means many of the patterns witnessed will be inconsequential since assets often have periods of indecision this makes sense spinning tops frequently occur when the price is already moving sideways or is about to start as for forecasting reversals the common nature of spinning tops also makes this problematic many spinning tops won t result in a reversal confirmation is required but even with confirmation there is no assurance the price will continue in the new direction trading around a spinning top can also pose some problems since the candle can be quite large from high to low if confirmation comes after a spinning top and a trade is taken placing a stop loss above or below the high low of the spinning top could result in a large risk which doesn t justify the potential reward assessing the reward potential of a spinning top trade is also difficult since the candlestick pattern doesn t provide a price target or exit plan traders need to utilize other candlestick patterns strategies or indicators to find a profitable exit | |
is a spinning top candlestick bullish or bearish | if the spinning top occurs at the bottom of a downtrend it could signal that a bullish reversal may happen conversely if the spinning top occurs at the top of an uptrend it could suggest a bearish reversal | |
what is the difference between a spinning top and a doji | spinning tops and dojis both represent indecision dojis are smaller with small real bodies and small upper and lower shadows the spinning top has long upper and lower shadows both patterns occur frequently and are sometimes used to warn of a reversal after a strong price move both types of candlesticks rely heavily on confirmation a strong move after the spinning top or doji tells more about the new potential price direction than the spinning top or doji itself | |
what is a candlestick | a candlestick is a type of price chart used in technical analysis it displays the high low open and closing prices of a security over a specific period of time the wide part of the candlestick is called the real body and tells investors whether the closing price was higher or lower than the opening price the bottom linethe spinning top candlestick pattern represents indecision and uncertainty about the future course of an asset it indicates that the bulls sent the price higher while the bears pushed it low again resulting in no meaningful change in price however a spinning top can signify a future price reversal if confirmed by the next candle the spinning top is considered a common candlestick pattern and trading it is similar than trading other candlestick formations traders should combine it with other candlestick patterns and indicators to find a profitable exit | |
what is a spinoff | a spinoff is a new and separate company that s created when a parent company distributes shares in a subsidiary or business division to the parent company shareholders 1 it is a type of divestiture a parent company creates a spinoff expecting that it will be worth more as an independent entity than it was as part of the parent company a spinoff is also known as a spinout or starburst mira norian investopediaunderstanding spinoffsa parent company will spin off part of its business if it expects that it will be lucrative to do so the spinoff will have a separate management structure and a new name but it will retain the same assets intellectual property and human resources the parent company will continue to provide financial and technological support in most cases a corporation creates a spinoff by distributing 100 of its ownership interest in that business unit as shares of stock to existing shareholders it can also offer its existing shareholders a discount to exchange their shares in the parent company for shares of the spinoff for example an investor could exchange 100 of the parent s stock for 110 of the spinoff s stock spinoffs tend to increase returns for shareholders because the newly independent companies can better focus on their specific products or services | |
why spinoffs happen | a spinoff may occur for various reasons but the overall belief is that it will be more profitable as an independent entity than it was as a part of the parent company and the parent company may then be better positioned to achieve greater value as well both the parent company and the spinoff tend to perform better as a result of the spinoff transaction with each now able to focus more effectively on its core competencies risks of spinoffsthe downside of spinoffs is that their share price can be more volatile and tend to underperform in weak markets and outperform in strong markets spinoffs can also experience high selling activity initially parent company shareholders may not want the shares of the spinoff they received because the spinoff may not fit their investment criteria the share price may dip in the short term because of this selling activity even if the spinoff s long term prospects are positive examples of spinoffsspinoffs are a common occurrence typically dozens are created each year in the united states examples include the spinoff of smith wesson inc from american outdoor brands corp and the separation of paypal inc from its parent company ebay inc 23in addition in early 2023 general electric spun off its healthcare division ge healthcare technologies and jefferies financial group spun off its holdings of vitesse 45 | |
what happens in a spinoff | a parent company distributes shares in a division or subsidiary to parent company shareholders and creates a wholly separate business entity | |
what effect does a spinoff have on parent company shares | initially a spinoff will cause the price of the parent company stock to drop as the assets now owned by the spinoff are removed from the parent company s financials lowering the company book value parent company shareholders should see that together both share prices should approximate the parent company s pre spinoff stock price | |
are spinoffs good for investors | they can be generally both company shares and spinoff shares tend to outperform the market in the first couple of years following a spinoff after some initial dips and volatility in addition as a small company the spinoff has great potential for growth along with a focused enthusiastic management this can attract investors which can boost share price however spinoff shares can be volatile due to the company being new and lacking financial performance history the bottom linea spinoff also known as a spinout or starburst creates a new company out of an existing company it s a type of divestiture and is only done if a parent company expects that the new company will be worth more on its own and the parent company can offer added value without it bear in mind that the share price of a spinoff can be volatile as the market adjusts to the new company | |
what is spoofing | spoofing is a type of scam in which a criminal disguises an email address display name phone number text message or website url to convince a target that they are interacting with a known trusted source spoofing often involves changing just one letter number or symbol of the communication so that it looks valid at a quick glance for example you could receive an email that appears to be from netflix using the fake domain name netffix com | |
how spoofing works | spoofing criminals try to gain your trust and they count on making you believe that the spoofed communications are legitimate often using the name of a big trusted company such as amazon or paypal is enough to get targets to take some kind of action or reveal information for instance a fake email from amazon might indicate a problem with a recent purchase which could motivate you to click on the link to learn more hint don t click on the link from that link you could download malware or be directed to a fake login page where you unknowingly enter your username and password spoofing can lead you to disclose personal and financial information send money and download malware which can lead to infected computers financial fraud and identity theft spoofing can be used to spread malware via links and attachments bypass network access controls and restrict access through denial of service dos attacks at the corporate level spoofing can cause infected computer systems and networks data breaches and loss of income 2there are several kinds of spoofing including email spoofing text message spoofing caller id spoofing and url and gps spoofing essentially if there s a form of online communication spoofers are trying to scam their way into it and into your identity and your assets | |
how to protect yourself from spoofing | there are several ways to protect yourself from would be spoofing scammers 3if you think you ve been spoofed you can file a complaint at the consumer complaint center of the federal communications commission fcc 1 the fcc doesn t act on individual complaints but will add that information to its database if you ve lost money because of spoofing the fcc recommends contacting your local police department types of spoofingemail spoofing is the act of sending emails with false sender addresses typically as part of a phishing attack intended to steal your data ask for money or infect your computer with malware this tactic is used by both dishonest advertisers and outright thieves the spoofer sends emails with a falsified from line to trick victims into believing that the message is from a friend their bank or some other legitimate source any email that asks for your password social security number or any other personal information could be a trick these emails typically include a combination of deceptive features including 3sometimes referred to as smishing text message sms spoofing is similar to email spoofing the text message appears to come from a legitimate source such as your bank or a doctor s office it may request that you call a specific phone number or click on a link within the message to get you to divulge personal information here the spoofer falsifies the phone number from which they are calling in the hope of getting you to take their call on your caller id it might appear that the call is coming from a legitimate business or government agency such as the internal revenue service irs note that the irs says it doesn t call taxpayers to tell them they owe taxes without first sending them a bill in the mail spoofing comes in many forms but the goal is usually to trick people into divulging personal information that criminals can use this is a type of caller id spoofing in which the call appears to be from someone you know or a person who lives near you the fcc says that the truth in caller id act prohibits anyone from transmitting misleading or inaccurate caller id information with the intent to defraud cause harm or wrongly obtain anything of value if they re caught and that s a big if the spoofer can face penalties of up to 10 000 for each violation 4url spoofing happens when scammers set up a fraudulent website to obtain information from victims or install malware on their computers for instance victims might be directed to a site that looks like it belongs to their bank or credit card company and be asked to log in using their user id and password if the person falls for it and logs in the scammer could then use the information that the victim typed in to log into the real site and access their accounts gps spoofing has a somewhat different purpose it attempts to trick a gps receiver into believing it is in a different location or headed in a different direction by broadcasting bogus gps signals or other means at this point gps spoofing is more likely to be used in warfare or by gamers e g pok mon go players than to target individual consumers although the technology exists to make anyone vulnerable these spoofing attacks involve three players the victim the entity that the victim is trying to communicate with and the man in the middle who intercepts the communications the spoofer attempts to eavesdrop on the exchange or impersonate one of the parties the goal is to intercept information that is useful sensitive or potentially profitable e g login credentials and credit card information stolen information can be used to approve financial transactions for identity theft or it may be sold to a third party 3this type of scam happens when someone wants to disguise or hide the location from where they re sending or requesting data so they replace the source internet protocol ip address with a fake one the spoofed ip address looks like it s from a trusted source the original ip address while masking its true identity an unknown third party 5 virtual private network vpn services allow users to mask their ip and location which can also be used for legitimate reasons such as privacy or streaming content went traveling overseas this is the latest form of spoofing with facial spoofing a criminal uses a person s face and simulates their facial biometrics by using a photo or video to replace their identity facial spoofing is most commonly used to commit bank identity fraud however it is also used in money laundering spoofing involves faking one s identity and can be used for various attacks such as identity theft phishing is one such use of spoofing that attempts to steal somebody s personal information or credentials by having them volunteer that information from a nefarious source that looks legit for instance a phishing email may appear to come from your bank but the link inside would direct you to a phony version of the bank s website if you enter your credentials they are subsequently turned over to the attacker | |
how to detect spoofing | spoofing can be sophisticated so the key is to pay close attention to the details and trust your instincts be wary of websites with no lock symbols or green bars or urls that begin with http instead of https the encrypted version of http another way to tell a fake website is if your password manager doesn t autofill your login a sign that it doesn t recognize the website with emails take a close look at the sender s address keeping in mind that scammers will use fake domains that are very similar to legitimate ones of course typos bad grammar and unusual syntax in the email are also red flags if you re still unsure copy and paste the contents of the email into google where a quick search can reveal if a known scam is circulating finally always hover over an embedded link to reveal the url before you click on it if the url looks suspicious it is likely a scam 3 expand the details of the sender to see if the email address is correct and not just the name also pay attention for alternations in small details like a capital i i for a small l l with phones caller id is easily spoofed scammers often use neighbor spoofing so it appears that calls are coming from a local number they may also spoof a number from a government agency or business that you know and trust the fcc advises people not to answer calls from unknown numbers and to hang up immediately if you do answer such a call 6to hover on a link that s on your smartphone hold your finger on the link for a few seconds a window will pop up that shows the full url of the link this can help you determine if the link is reliable or suspicious 7 | |
is spoofing illegal | spoofing can be illegal depending on the type of spoof the intent and the jurisdiction involved if you mask your phone number but there is no harm spoofing is legal but in the u s the fcc prohibits anyone from transmitting misleading or inaccurate caller id information with the intent to defraud with fines up to 10 000 per instance 6 | |
what is an example of spoofing | a common spoofing scenario happens when an email is sent from a fake sender address asking the recipient to provide sensitive data typically the recipient is prompted to click on a link to log into their account and update personal and financial details links in spoofing emails also infect the recipient s computer with malware | |
what is the difference between spoofing and phishing | the terms spoofing and phishing are often used interchangeably but they mean different things spoofing uses a fake email address display name phone number or web address to trick people into believing that they are interacting with a known trusted source phishing tricks you into providing personal data that can be used for identity theft many phishers use spoofing tactics to trick their victims into believing they are providing personal information to a legitimate trusted source 2the bottom linepeople have pretended to be other people or the representatives of other organizations since time immemorial however with the advent of the internet and online communications spoofing has become much easier and more widespread websites emails geolocations and phone numbers today can all be spoofed by bad actors to commit crimes steal identities or perpetuate scams knowing how to spot and protect against spoofing is important in the digital age at the same time spoofing can provide anonymity for internet users for legitimate purposes of privacy the use of vpns for instance can mask your location and identity when surfing the web | |
what is a spot exchange rate | a spot exchange rate is the current price at which a person can exchange one currency for another at a specific time put simply a spot exchange rate refers to the cost of the currency exchanged instantly and without delay spot exchange rates are used for delivery on the earliest possible value date cash delivery for spot currency transactions is usually the standard settlement date of two business days after the transaction date t 2 these exchange rates are set and governed by the foreign exchange market understanding spot exchange ratesthe spot exchange rate is best thought of as how much you need to pay in one currency to buy another at any moment in time spot rates are usually set through the global foreign exchange forex market where currency traders institutions and countries clear transactions and trades the forex market is the largest and most liquid market in the world with trillions of dollars changing hands daily 12 the most actively traded currencies are the u s dollar the euro the japanese yen the british pound and the chinese renminbi 3 the euro is used in many continental european countries including germany france and italy 4global forex trading takes place electronically between large multinational banks corporations mutual funds hedge funds insurance companies and government entities transactions are made for a wide range of purposes including import and export payments short and long term investments loans and speculation economists analysts and investors can determine the health and well being of a nation s economy by analyzing the spot exchange rate of its currency strong spot rates point to a healthy economy while weak rates may be indicative of economic troubles some currencies especially those in developing economies are controlled by governments that set the spot exchange rate for instance the central government of china has a currency peg policy that sets the yuan and keeps it within a tight trading range against the u s dollar 5special considerationsthe foreign exchange spot market can be very volatile in the short term rates are often driven by news speculation and technical trading in the long term rates are generally driven by a combination of national economic fundamentals and interest rate differentials central banks may intervene to smooth the market either by buying or selling the local currency or by adjusting interest rates countries with large foreign currency reserves are much better positioned to influence their domestic currency s spot exchange rate spot exchange rate transactionsthe settlement date for most spot exchange rate transactions is two business days after the transaction date the most common exception to the rule is a u s dollar versus the canadian dollar transaction which settles on the next business day weekends and holidays mean that two business days are often far more than two calendar days especially during the various holiday seasons around the world speculators often buy and sell multiple times for the same settlement date in which case the transactions are netted and only the gain or loss is settled currency is never meant to be delivered there are different ways in which traders and investors can execute a spot forex exchange on the transaction date the two parties involved in the transaction agree on the amount of currency a that will be exchanged for currency b they also agree on the rate of exchange finally the parties also agree on the value of the transaction in both currencies and the settlement date 6 if the currencies are to be delivered the parties also exchange bank information a new york fed survey found that the north american forex market s average daily trading volume for all forex instruments including spot forwards swaps and options was 1 021 trillion in october 2023 the usd mxn and gbp usd currency pairs showed the largest increases in trading volume since april 2023 according to the survey 7spot exchange rate vs real effective exchange rate reer spot exchange rates are different from real effective exchange rates reers while the spot rate is the market rate at any given point in time the reer indicates the value of a currency relative to its trading partners as such it is the weighted average of a country s currency related to a basket of other currencies unlike the spot rate which is regulated by the forex market the reer is heavily influenced by central bank policies other than monetary policy several other factors can affect a currency s reer such as 89 | |
what s the spot exchange rate | the spot exchange rate is the price set by the forex market at which you can buy a currency today think of it as buying on the spot the settlement date for your transaction will take place two business days later for the majority of currencies | |
what s the difference between spot and forward exchange rates | spot exchange rates represent the immediate exchange rate between two currencies as such it represents the rate at which one currency can be purchased using another on the spot a forward exchange rate though is the rate used to settle a currency exchange at a future date | |
what do i pay when i need euros for a trip | you pay the spot price as well as related fees potentially it s the price available at the time you get that currency from a forex dealer in your town or order it through your bank the spot price changes all the time because currency exchange rates constantly change the bottom linean exchange rate is the rate at which one currency can be changed for another rates vary based on who is using them and why spot exchange rates are used for various reasons including foreign investment and international and commercial trade foreign exchange investors also use spot rates when they make speculative trades to boost their profits it can also be used to determine the well being of a nation s economy strong rates indicate a healthy economy | |
what is a spot market | the spot market is where financial instruments such as commodities currencies and securities are traded for immediate delivery delivery is the exchange of cash for the financial instrument a futures contract on the other hand is based on the delivery of the underlying asset at a future date exchanges and over the counter otc markets may provide spot trading and or futures trading investopedia yurle villegas | |
how spot markets work | spot markets are also referred to as physical markets or cash markets because trades are swapped for the asset effectively immediately while the official transfer of funds between the buyer and seller may take time such as t 1 in the stock market and in most currency transactions both parties agree to the trade right now 1 a non spot or futures transaction is agreeing to a price now but delivery and transfer of funds will take place at a later date futures trades in contracts that are about to expire are also sometimes called spot trades since the expiring contract means that the buyer and seller will be exchanging cash for the underlying asset immediately spot pricethe current price of a financial instrument is called the spot price it is the price at which an instrument can be sold or bought immediately buyers and sellers create the spot price by posting their buy and sell orders in liquid markets the spot price may change by the second or even within milliseconds as orders get filled and new ones enter the marketplace the word spot comes from the phrase on the spot where in these markets you can purchase an asset on the spot spot market and exchangesexchanges bring together dealers and traders who buy and sell commodities securities futures options and other financial instruments based on all the orders provided by participants the exchange provides the current price and volume available to traders with access to the exchange spot market and over the countertrades that occur directly between a buyer and seller are called over the counter otc a centralized exchange does not facilitate these trades the foreign exchange market or forex market is the world s largest otc market with an average daily turnover of 7 5 trillion as of april 2022 2in an otc transaction the price can be either based on a spot or a future price date in an otc transaction the terms are not necessarily standardized and therefore may be subject to the discretion of the buyer and or seller as with exchanges otc stock transactions are typically spot trades while futures or forward transactions are often not at the spot price unless they are nearing expiration example of a spot marketlet s say an online furniture store in germany offers a 30 discount to all international customers who pay within five business days after placing an order danielle who operates an online furniture business in the united states sees the offer and decides to purchase 10 000 worth of tables from the online store since she needs to buy euros for almost immediate delivery and is happy with the current eur usd exchange rate of 1 1233 danielle executes a foreign exchange transaction at the spot price to buy the equivalent of 10 000 in euros which works out to be 8 902 34 10 000 1 1233 the spot transaction has a settlement date of t 2 so danielle receives her euros in two days and settles her account to receive the 30 discount advantages and disadvantages of spot marketsthe spot price is the current quote for immediate purchase payment and delivery of a particular commodity this means that it is incredibly important since prices in derivatives markets such as for futures and options will be inevitably based on these values spot markets also tend to be incredibly liquid and active for this reason commodity producers and consumers will engage in the spot market and then hedge in the derivatives market a disadvantage of the spot market however is taking delivery of the physical commodity if you buy spot pork bellies you now own some live hogs while a meat processing plant may desire this a speculator probably does not another downside is that spot markets cannot be used effectively to hedge against the production or consumption of goods in the future which is where derivatives markets are better suited real time prices of actual market pricesactive and liquid marketscan take immediate delivery if desiredmust take physical delivery in many casesnot suited for hedgingspot market faqsspot markets trade commodities or other assets for immediate or very near term delivery the word spot refers to the trade and receipt of the good being made on the spot many commodities have active spot markets where physical spot commodities are bought and sold in real time for cash foreign exchange fx also has spot currencies markets where the underlying currencies are physically exchanged following the settlement date delivery usually occurs within 2 days after execution as it generally takes 2 days to transfer funds between bank accounts stock markets can also be thought of as spot markets with shares of companies changing hands in real time a spot market is where spot commodities or other assets like currencies are traded for immediate delivery for cash forward and futures markets instead involve the trading of contracts where the purchase is to be completed at a later date read on to the following question for more on this forwards and futures are derivatives contracts that use the spot market as the underlying asset these are contracts that give the owner control of the underlying at some point in the future for a price agreed upon today only when the contracts expire would physical delivery of the commodity or other asset take place and often traders will roll over or close out their contracts in order to avoid making or taking delivery altogether forwards and futures are generically the same except that forwards are customizable and trade over the counter otc whereas futures are standardized and traded on exchanges 3 | |
the spot price is the current price in the marketplace at which a given asset such as a security commodity or currency can be bought or sold for immediate delivery while spot prices are specific to both time and place in a global economy the spot price of most securities or commodities tends to be fairly uniform worldwide when accounting for exchange rates in contrast to the spot price a futures price is an agreed upon price for future delivery of the asset | basics of spot pricespot prices are most frequently referenced in relation to the price of commodity futures contracts such as contracts for oil wheat or gold this is because stocks always trade at spot you buy or sell a stock at the quoted price and then exchange the stock for cash a futures contract price is commonly determined using the spot price of a commodity expected changes in supply and demand the risk free rate of return for the holder of the commodity and the costs of transportation or storage in relation to the maturity date of the contract futures contracts with longer times to maturity normally entail greater storage costs than contracts with nearby expiration dates spot prices are in constant flux while the spot price of a security commodity or currency is important in terms of immediate buy and sell transactions it perhaps has more importance in regard to the large derivatives markets options futures contracts and other derivatives allow buyers and sellers of securities or commodities to lock in a specific price for a future time when they want to deliver or take possession of the underlying asset through derivatives buyers and sellers can partially mitigate the risk posed by constantly fluctuating spot prices futures contracts also provide an important means for producers of agricultural commodities to hedge the value of their crops against price fluctuations the relationship between spot prices and futures pricesthe difference between spot prices and futures contract prices can be significant futures prices can be in contango or backwardation contango is when futures prices fall to meet the lower spot price backwardation is when futures prices rise to meet the higher spot price backwardation tends to favor net long positions since futures prices will rise to meet the spot price as the contract get closer to expiry contango favors short positions as the futures lose value as the contract approaches expiry and converges with the lower spot price futures markets can move from contango to backwardation or vice versa and may stay in either state for brief or extended periods of time looking at both spot prices and futures prices is beneficial to futures traders examples of spot pricesan asset can have different spot and futures prices for example gold may have a spot price of 1 000 while its futures price may be 1 300 similarly the price for securities may trade in different ranges in the stock market and the futures market for example apple inc aapl may trade at 200 in the stock market but the strike price on its options may be 150 in the futures market reflecting pessimistic trader perceptions of its future | |
what is the spot rate | the spot rate is the price quoted for immediate settlement on an interest rate commodity a security or a currency the spot rate also referred to as the spot price is the current market value of an asset available for immediate delivery at the moment of the quote this value is in turn based on how much buyers are willing to pay and how much sellers are willing to accept which usually depends on a blend of factors including current market value and expected future market value while spot prices are specific to both time and place in a global economy the spot price of most securities or commodities tends to be fairly uniform worldwide when accounting for exchange rates in contrast to the spot price a futures or forward price is an agreed upon price for future delivery of the asset mgstudyo getty imagesunderstanding spot ratesin currency transactions the spot rate is influenced by the demands of individuals and businesses wishing to transact in a foreign currency as well as by forex traders the spot rate from a foreign exchange perspective is also called the benchmark rate straightforward rate or outright rate besides currencies assets that have spot rates include commodities e g crude oil conventional gasoline propane cotton gold copper coffee wheat lumber and bonds commodity spot rates are based on supply and demand for these items while bond spot rates are based on the zero coupon rate a number of sources including bloomberg morningstar and thomsonreuters provide spot rate information to traders these same spot rates particularly currency pairs and commodity prices are widely publicized in the news the spot rate and the forward ratespot settlement i e the transfer of funds that completes a spot contract transaction normally occurs one or two business days from the trade date also called the horizon the spot date is the day when settlement occurs regardless of what happens in the markets between the date the transaction is initiated and the date it settles the transaction will be completed at the agreed upon spot rate the spot rate is used in determining a forward rate the price of a future financial transaction since a commodity security or currency s expected future value is based in part on its current value and in part on the risk free rate and the time until the contract matures traders can extrapolate an unknown spot rate if they know the futures price risk free rate and time to maturity the relationship between spot prices and futures pricesthe difference between spot prices and futures contract prices can be significant futures prices can be in contango or backwardation contango is when futures prices fall to meet the lower spot price backwardation is when futures prices rise to meet the higher spot price backwardation tends to favor net long positions since futures prices will rise to meet the spot price as the contract get closer to expiry contango favors short positions as the futures lose value as the contract approaches expiry and converges with the lower spot price 1futures markets can move from contango to backwardation or vice versa and may stay in either state for brief or extended periods of time looking at both spot prices and futures prices is beneficial to futures traders example of how the spot rate worksas an example of how spot contracts work say it s the month of august and a wholesaler needs to make delivery of bananas she will pay the spot price to the seller and have bananas delivered within 2 days however if the wholesaler needs the bananas to be available at its stores in late december but believes the commodity will be more expensive during this winter period due to higher demand and lower overall supply she cannot make a spot purchase for this commodity since the risk of spoilage is high since the commodity wouldn t be needed until december a forward contract is a better fit for the banana investment in the example above an actual physical commodity is being taken for delivery this type of transaction is most commonly executed through futures and traditional contracts that reference the spot rate at the time of signing traders on the other hand generally don t want to take physical delivery so they will use options and other instruments to take positions on the spot rate for a particular commodity or currency pair | |
what is a spot trade | a spot trade also known as a spot transaction refers to the purchase or sale of a foreign currency financial instrument or commodity for instant delivery on a specified spot date most spot contracts include the physical delivery of the currency commodity or instrument the difference in the price of a future or forward contract versus a spot contract takes into account the time value of the payment based on interest rates and the time to maturity in a foreign exchange spot trade the exchange rate on which the transaction is based is referred to as the spot exchange rate a spot trade can be contrasted with a forward or futures trade understanding a spot tradeforeign exchange spot contracts are the most common type and are usually specified for delivery in two business days while most other financial instruments settle the next business day the spot foreign exchange forex market trades electronically around the world it is the world s largest market with over 7 55 trillion traded daily its size dwarfs both the interest rate and commodity markets 123the current price of a financial instrument is called the spot price it is the price at which an instrument can be sold or bought immediately buyers and sellers create the spot price by posting their buy and sell orders in liquid markets the spot price may change by the second as outstanding orders get filled and new ones enter the marketplace foreign exchange spot contracts are the most popular and the spot foreign exchange market traded electronically is the largest in the world 4special considerationsthe price for any instrument that settles later than the spot is a combination of the spot price and the interest cost until the settlement date in the case of forex the interest rate differential between the two currencies is used for this calculation most interest rate products such as bonds and options trade for spot settlement on the next business day contracts are most commonly between two financial institutions but they can also be between a company and a financial institution an interest rate swap in which the near leg is for the spot date usually settles in one business days 5commodities are usually traded on an exchange the most popular is the cme group previously known as the chicago mercantile exchange and the intercontinental exchange which owns the new york stock exchange nyse 67 most commodity trading is for future settlement and is not delivered the contract is sold back to the exchange prior to maturity and the gain or loss is settled in cash | |
what is spread betting | spread betting refers to speculating on the direction of a financial market without actually owning the underlying security it involves placing a bet on the price movement of a security a spread betting company quotes two prices the bid and ask price also called the spread and investors bet whether the price of the underlying security will be lower than the bid or higher than the ask the spread bettor does not actually own the underlying security in spread betting they simply speculate on its price movement spread betting should not be confused with spread trading which involves taking offsetting positions in two or more different securities and profiting if the difference in price between the securities widens or narrows over time understanding spread bettingspread betting lets investors speculate on the price movement of various financial instruments such as stocks forex commodities currencies cryptocurrencies and fixed income securities in other words an investor makes a bet based on whether they think the market will rise or fall from the time their bet is accepted they also get to choose how much they want to risk on their bet it is promoted as a tax free commission free activity that allows investors to profit from either bull or bear markets spread betting is a leveraged product which means investors only need to deposit a small percentage of the position s value for example if the value of a position is 50 000 and the margin requirement is 10 a deposit of just 5 000 is required this magnifies both gains and losses which means investors can lose more than their initial investment spread betting is not available to residents of the united states due to regulatory and legal limitations managing risk in spread bettingdespite the risk that comes with the use of high leverage spread betting offers effective tools to limit losses risk can also be mitigated by the use of arbitrage betting two ways simultaneously spread betting examplelet s assume that the price of abc stock is 201 50 and a spread betting company with a fixed spread is quoting the bid ask at 200 203 for investors to transact on it the investor is bearish and believes that abc is going to fall below 200 so they hit the bid to sell at 200 they decide to bet 20 for every point the stock falls below their transacted price of 200 if abc falls to where the bid ask is 185 188 the investor can close their trade with a profit of 200 188 20 240 if the price rises to 212 215 and they choose to close their trade then they will lose 200 215 20 300 the spread betting firm requires a 20 margin which means the investor needs to deposit 20 of the value of the position at its inception 200 20 20 800 into their account to cover the bet the position value is derived by multiplying the bet size by the stock s bid price 20 x 200 4 000 spread betting benefitsinvestors have the ability to bet on both rising and falling prices if an investor is trading physical shares they have to borrow the stock they intend to short sell which can be time consuming and costly spread betting makes short selling as easy as buying spread betting companies make money through the spread they offer there is no separate commission charge which makes it easier for investors to monitor trading costs and work out their position size spread betting is considered gambling in some tax jurisdictions and subsequently any realized gains may be taxable as winnings and not capital gains or income investors who exercise spread betting should keep records and seek the advice of an accountant before completing their taxes because taxation on winnings in some countries is far less than that on capital gains or trading income spread betting can be quite tax efficient depending on one s location limitations of spread bettinginvestors who don t understand leverage can take positions that are too large for their account which can result in margin calls investors should risk no more than 2 of their investment capital deposit on any one trade and always be aware of the position value of the bet they intend to open during periods of volatility spread betting firms may widen their spreads this can trigger stop loss orders and increase trading costs investors should be wary about placing orders immediately before company earnings announcements and economic reports spread betting vs cfdsmany spread betting platforms will also offer trading in contracts for difference cfds which are a similar type of contract cfds are derivative contracts where traders can bet on short term price moves there is no delivery of physical goods or securities with cfds but the contract itself has transferrable value while it is in force the cfd is thus a tradable security established between a client and the broker who are exchanging the difference in the initial price of the trade and its value when the trade is unwound or reversed although cfds allow investors to trade the price movements of futures they are not futures contracts by themselves cfds do not have expiration dates containing preset prices but trade like other securities with buy and sell prices spread bets on the other hand do have fixed expiration dates when the bet is first placed cfd trading also requires that commissions and transaction fees be paid up front to the provider in contrast spread betting companies do not take fees or commissions when the contract is closed and profits or losses are realized the investor is either owed money or owes money to the trading company if profits are realized the cfd trader will net the profit of the closing position minus the opening position and fees profits for spread bets will be the change in basis points multiplied by the dollar amount negotiated in the initial bet both cfds and spread bets are subject to dividend payouts assuming a long position contract while there is no direct ownership of the asset a provider and spread betting company will pay dividends if the underlying asset does as well when profits are realized for cfd trades the investor is subject to capital gains tax while spread betting profits are usually tax free | |
what is financial spread betting | spread betting is a way to bet on the change in the price of some security index or asset without actually owning the underlying instrument | |
is spread betting gambling | while spread betting can be used to speculate with leverage it can also be used to hedge existing positions or make informed directional trades as a result many who participate prefer the term spread trading from a regulatory and tax standpoint it may be considered a form of gambling in certain jurisdictions since no actual position is taken in the underlying instrument | |
is financial spread betting legal in the u s | the majority of u s based brokers do not offer spread betting as it may be illegal or subject to overt regulatory scrutiny in many u s states as a result spread betting is largely a non u s activity the bottom linespread betting is a form of speculating or betting on which direction a financial market might go without actually owning the underlying security the bettor instead is wagering on the security s likely change in price a spread betting company quotes both the bid and ask price or the spread and investors wager on whether the price of the security will fall short of the bid or surpass the ask | |
what is a spread | a spread can have several meanings in finance generally the spread refers to the difference or gap that exists between two prices rates or yields in one of the most common definitions the spread is the gap between the bid and the ask prices of a security or asset like a stock bond or commodity this is known as a bid ask spread spreads can also be constructed in financial markets between two or more bonds stocks or derivatives contracts among others bond investors look at the spread to worst stw when comparing securities with similar durations understanding spreadsspreads can also refer to the difference in a trading position the gap between a short position that is selling in one futures contract or currency and a long position that is buying in another this is officially known as a spread trade in underwriting the spread can mean the difference between the amount paid to the issuer of a security and the price paid by the investor for that security that is the cost an underwriter pays to buy an issue compared to the price at which the underwriter sells it to the public in lending the spread can also refer to the price a borrower pays above a benchmark yield to get a loan if the prime interest rate is 3 for example and a borrower gets a mortgage charging a 5 rate the spread is 2 the spread trade is also called the relative value trade spread trades are the act of purchasing one security and selling another related security as a unit usually spread trades are done with options or futures contracts these trades are executed to produce an overall net trade with a positive value called the spread spreads are often priced as a single unit or as pairs on derivatives exchanges to ensure the simultaneous buying and selling of a security doing so eliminates execution risk wherein one part of the pair executes but another part fails types of spreadsspreads exist in many financial markets and vary depending on the type of security or financial instrument involved in many securities that feature a two sided market such as most stocks there is a bid ask spread that appears as the difference between the highest bid price and the lowest offer the bid ask spread is often used to judge a stock s liquidity bid ask spreads also feature prominently in forex trading and can vary depending on a number of factors including the liquidity of the currency pair market conditions and the broker s own pricing policies some brokers charge fixed spreads while others charge variable spreads that can fluctuate based on market conditions it s important for traders to understand the spreads that they are being quoted as they can have a significant impact on the overall cost of a trade spreads can be constructed in any number of ways and so a trader can use a spread strategy to profit from a bullish bearish or sideways market or if the spread widens vs narrows because of this spreading is a very flexible tool used by traders suppose an investor is considering two bonds a corporate bond issued by company xyz with a yield of 5 and a u s treasury bond with a yield of 3 the yield spread in this case would be 2 5 3 indicating that the corporate bond is yielding 2 more than the u s treasury bond if the investor believes that the risk of default on the corporate bond is low and the company is financially sound they might decide to buy the corporate bond and sell the u s treasury bond in order to profit from the yield spread this would be known as a yield spread trade if the investor s assessment of the credit risk of company xyz is correct and the bond performs as expected they will earn the 5 yield on the corporate bond and realize a profit from the yield spread of 2 however if the credit risk of company xyz turns out to be higher than expected and the bond defaults the investor could lose their entire investment in the bond this is why it is important for investors to carefully consider the credit risk of any bond before entering into a yield spread trade an illustrative example of a spread used in trading is a bull call spread this is a bullish options trading strategy that involves the purchase of a call option with a strike price that is below the current market price and the simultaneous sale of another call option with a higher strike price for example let s say that xyz stock is currently trading at 50 per share an investor who is bullish on xyz stock might buy a call option with a strike price of 45 per share and sell a call option with a strike price of 55 per share the goal of this bull call spread is to profit from an upward move in the price of xyz stock while limiting the potential loss if the stock does not move as expected if xyz stock rises to 60 per share the call option with the strike price of 45 per share would be in the money and have a value of 15 per share 60 market price 45 strike price the call option with the strike price of 55 per share would also be in the money but with a value of only 5 per share 60 market price 55 strike price the net profit for the investor in this case would be the difference between the two options or 10 per share if xyz stock does not rise above the strike price of the call option that was sold in this case 55 per share then both options would expire worthless and the investor would lose the premium paid for the call option that was purchased this is why the bull call spread is considered a limited risk strategy spread risksspread trading like any other form of trading carries a number of risks that traders and investors should be aware of for example market risk can affect the value of the underlying assets and the profitability of the spread trade thus if a trader enters into a bull call spread on a stock that they believe will rise in price but the stock s price unexpectedly drops due to market conditions the trader may suffer a loss on the spread trade likewise if you bet that a spread will narrow but it widens you can lose money in addition there are other potential risks involved with spreads | |
how do you calculate a spread in finance | most basically a spread is calculated as the difference in two prices a bid ask spread is computed as the offer price less the bid price an options spread is priced as the price of one option less the other and so on | |
why would someone buy a spread | traders look to profit from spreads by betting that the size of the spread will narrow or widen over time if you buy a spread you believe that the spread between two prices will widen for example if you believe that interest rates on junk bonds will rise faster than that of treasuries you can buy that yield spread | |
how do you put on a spread in trading | to put on a spread position in the markets you generally buy one asset or security and simultaneously sell another related asset or security the resulting spread price is the difference between the price paid the proceeds received from the sale the bottom linein finance a spread refers to the difference or gap between two prices rates or yields one common use of spread is the bid ask spread which is the gap between the bid from buyers and the ask from sellers prices of a security or asset a spread can also refer to the difference in a trading position such as the gap between a short position selling in one futures contract or currency and a long position buying in another known as a spread trade spreads can also refer to the difference in the amount paid to the issuer of a security and the price paid by the investor for that security in underwriting or the price a borrower pays above a benchmark yield to get a loan in lending there are several different types of spreads including yield spreads option adjusted spreads and z spreads which are used in different contexts in finance | |
what is a stable value fund | a stable value fund is a portfolio of bonds that are insured to protect the investor against a decline in yield or a loss of capital the owner of a stable value fund will continue to receive the agreed upon interest payments regardless of the state of the economy stable value funds are a common option in some retirement plans such as company 401 k plans especially aimed at those savers nearing retirement understanding stable value fundstable value funds invest in high quality government and corporate bonds short term and intermediate term they are no different from any bond fund except they are insured an insurance company or bank is contractually obligated to protect the fund s investors from any loss of capital or interest the bonds in such a fund are sometimes called wrapped bonds referring to the fact that they are insured the insurance is commonly issued in the form of a so called synthetic guaranteed investment certificate gic a stable value fund is inherently as safe an investment as a money market fund historically such funds provide a slightly higher rate of return than money market funds pros and cons of stable bond fundsstable value funds remain just that stable they don t grow over time but they don t lose value either in times of recession or stock market volatility stable value funds are guaranteed while many other investments drop in value the owner of a stable bond fund continues to receive the agreed upon interest payments and never loses principal regardless of the state of the economy the insurer must compensate the fund for any losses because of the insurance however these funds come with extra management costs and fees which can be a drag on the already lower yields that these investments offer due to their low risk | |
how to invest in a stable bond fund | a stable value fund is often an investment option in qualified retirement plans such as 401 k plans a stable value fund may also be an appealing alternative to lower yielding vehicles such as money market funds for the portion of an investor s portfolio that is used to counter market volatility stable value funds can provide the essential elements of balance and stability in a portfolio weighted in growth investments however there is a danger if a portfolio is weighted too heavily in lower yielding investments such as stable value funds the investor risks being squeezed by inflation down the road a retirement income that seems sufficient initially can gradually become inadequate as the years pass and inflation mounts most professional financial advisors recommend a portfolio that is a mix of safe but low yielding investments and risky but potentially rewarding investments with a gradual reweighting towards safety as the investor approaches retirement age investors also should check the expenses associated with stable value funds historically their fees have been in the low range compared to most mutual funds however insurance companies have been increasing their fees due to the perceived risks of a more volatile market | |
what is stagflation | stagflation is an economic cycle characterized by slow growth and a high unemployment rate accompanied by inflation economic policymakers find this combination particularly difficult to handle as attempting to correct one of the factors can exacerbate another once thought by economists to be impossible stagflation has occurred repeatedly in the developed world since the 1970s oil crisis in mid 2022 many were saying that the united states had not entered a period of stagflation but might soon experience one at least for a short period in june 2022 forbes magazine argued that a period of stagflation was likely because economic policymakers would tackle unemployment first leaving inflation to be dealt with later 1investopedia jiaqi zhouunderstanding stagflationthe term stagflation was first used by british politician iain macleod in a speech before the house of commons in 1965 a time of economic stress in the united kingdom 2 he called the combined effects of inflation and stagnation a stagflation situation the term was revived in the u s during the 1970s oil crisis during this time inflation doubled in 1973 and hit double digits in 1974 unemployment reached 9 by may 19753 4the effects of stagflation were illustrated by means of a misery index this index a simple sum of the inflation rate and the unemployment rate tracked the real world effects of stagflation on a nation s people stagflation was once believed to be impossible the economic theories that dominated academic and policy circles for much of the 20th century ruled it out of their models in particular the economic theory of the phillips curve which developed in the context of keynesian economics portrayed macroeconomic policy as a trade off between unemployment and inflation as a result of the great depression and the ascendance of keynesian economics economists became preoccupied with the dangers of deflation and argued that most policies designed to lower inflation tend to increase unemployment while policies designed to lower unemployment raise inflation the advent of stagflation across the developed world later in the 20th century showed that this was not the case stagflation is a great example of how real world experience can run roughshod over widely accepted economic theories and policy prescriptions since that time inflation has proved to be persistent even during periods of slow or negative economic growth in the past 50 years every declared recession in the u s has seen a continuous year over year rise in consumer price levels 5the sole partial exception to this is the lowest point of the 2008 financial crisis and even then the price decline was confined to energy and transportation prices while overall consumer prices other than energy continued to rise 6 | |
what causes stagflation | there is no real consensus among economists about the causes of stagflation they have put forth several arguments to explain how it occurs even though it was once considered impossible one theory states that stagflation is caused when a sudden increase in the cost of oil reduces an economy s productive capacity the oil crisis of the 1970s is the prime example in october 1973 the organization of petroleum exporting countries opec issued an embargo against western countries this caused the global price of oil to rise dramatically therefore increasing the costs of goods and contributing to a rise in unemployment 7because transportation costs rose producing products and getting them to shelves became more expensive and prices rose even as people were laid off from their jobs critics of this theory point out that sudden oil price shocks like those of the 1970s did not occur in connection with any of the simultaneous periods of inflation and recession that have occurred since the embargo 8another theory is that the confluence of stagnation and inflation is the result of poorly made economic policy harsh regulation of markets goods and labor in an otherwise inflationary environment are cited as the possible cause of stagflation some point to former president richard nixon s policies which may have led to the recession of 1970 a possible precursor to other periods of stagflation nixon put tariffs on imports and froze wages and prices for 90 days in an attempt to prevent prices from rising 9 once the controls were relaxed the rapid acceleration of prices led to economic chaos while appealing this is an ad hoc explanation of the stagflation of the 1970s which does not explain later periods that showed a simultaneous rise in prices and unemployment other theories point to monetary factors that may also play a role in stagflation nixon removed the last indirect vestiges of the gold standard bringing down the bretton woods system that had controlled currency exchange rates 10this decision removed commodity backing for the currency and put the u s dollar and most other world currencies on a fiat basis ending most practical constraints on monetary expansion and currency devaluation stagflation vs inflationwhatever the explanation we have seen inflation persist during periods of economic stagnation since the 1970s even before the 1970s some economists criticized the notion of a stable relationship between inflation and unemployment they argue that consumers and producers adjust their economic behavior to rising price levels either in reaction to or in expectation of monetary policy changes as a result prices rise in response to expansionary monetary policy without any corresponding decrease in unemployment while unemployment rates rise or fall based on real economic shocks to the economy this implies that attempts to stimulate the economy during recessions could simply inflate prices without promoting real economic growth urbanist and author jane jacobs saw the disagreements between economists on the causes of the stagflation of the 70s as a misplacement of scholarly focus on the nation rather than the city as the primary economic engine she believed that to avoid the phenomenon of stagflation a country needed to provide an incentive to develop import replacing cities that is cities that balance import with production this idea essentially the diversification of the economies of cities was critiqued for its lack of scholarship by some but held weight with others 1112special considerationsthe de facto consensus on stagflation among most economists and policymakers has been to essentially redefine what they mean by the term inflation in the era of modern currency and financial systems persistently rising price levels and falling purchasing power i e inflation are just normal conditions of good and bad economic times economists and policymakers generally assume that prices will rise and largely focus on accelerating and decelerating inflation rather than on inflation itself the dramatic episodes of stagflation in the 1970s may be historical footnotes today but since then simultaneous economic stagnation and rising prices appear to be part of the new normal of economic downturns | |
what causes stagflation | economists argue about the root causes of stagflation in general the stage is set for stagflation when a supply shock occurs this is an unexpected event such as a disruption in the oil supply or a shortage of essential parts such a shock occurred during the covid 19 pandemic with a disruption of the flow of semiconductors that slowed the production of everything from laptops to cars and appliances such a shock can affect all of the factors that make up stagflation inflation employment and economic growth | |
why is stagflation bad | stagflation is a combination of three negatives slower economic growth higher unemployment and higher prices this is a combination that isn t supposed to occur in the logic of economics prices shouldn t go up when people have less money to spend | |
what is the cure for stagflation | there is no definitive cure for stagflation the consensus among economists is that productivity has to be increased to the point where it will lead to higher growth without additional inflation this would then allow for the tightening of monetary policy to rein in the inflation component of stagflation that is easier said than done so the key to preventing stagflation is for economic policymakers to be extremely proactive in avoiding it | |
what is stagnation | stagnation is a prolonged period of little or no growth in an economy often highlighted by periods of high unemployment a rate of growth of less than 2 3 annually as measured by gross domestic product gdp is considered stagnation stagnation can occur on a macroeconomic scale or in specific industries or companies stagnation may be either a temporary condition such as a growth recession temporary economic shock or part of an economy s long term structural condition understanding stagnationstagnation occurs within an economy when total output is either declining flat or growing slowly persistent unemployment flat job growth no wage increases and an absence of stock market booms or highs are evidence of stagnation as economies cycle through periods of recession to growth or from growth to recession they may experience a time of stagnation stagnation can occur as a temporary condition in the course of an economic cycle or business cycle as a recession is ending and recovery is beginning during these periods both monetary policies and fiscal policies may be implemented to avoid prolonged stagnation specific events or economic shocks can induce periods of stagnation which may be short lived or have lasting effects depending on the specific events and the resilience of the economy war and famine can be external factors that cause stagnation a sudden increase in oil prices or a fall in demand for a key export could also induce a period of stagnation for an economy a stagnant economy can result from longer term structural conditions in a society mature economies are characterized by slower population growth stable economic institutions and slower growth rates classical economists refer to this type of stagnation as a stationary state and keynesian economists consider it common in an advanced economy institutional factors such as entrenched power among incumbent special interest groups who oppose competition and openness can induce economic stagnation western europe experienced this type of economic stagnation during the 1970s and 1980s dubbed eurosclerosis stagnation can afflict underdeveloped or emerging economies where stagnation persists due to the lack of change in political or economic institutions or regions with policies that discourage economic growth overcoming stagnationgovernments commonly implement a monetary policy or fiscal policy that spurs economic growth using tools such as government investment in infrastructure encourages new business projects in construction and materials and increases job creation as wages increase additional money flows into the economy raising demand for goods and services and increasing aggregate economic growth by reducing taxes and regulations businesses or small business owners retain more capital for investment and innovation improving growth in various sectors of the economy | |
when a central bank lowers interest rates saving money becomes less attractive people are more likely to increase their spending or invest in new businesses | stagnation vs stagflation vs recessionas an economy cycles from growth to decline or decline to growth it may have periods of stagnation stagflation or recession real world example of stagnationthe great recession which began in 2008 kicked off a long period of economic stagnation followed by a slow expansion from 2009 until the covid 19 pandemic in 2020 gdp growth averaged 2 3 during this time 1 during the aftermath and recovery of the great recession the federal reserve s monetary policy included quantitative easing to help the united states spur the stalled economy | |
what is the average gdp during periods of stagnation | stagnation is a period of slow growth in an economy characterized by a gdp under 2 or 3 | |
how are investors affected by stagnation | during a period of stagnation the stock market sees fewer gains and stock mutual fund and etf prices often hold steady or fall slightly during stagnation | |
how are workers affected by stagnation | stagnation is evident with higher unemployment and falling wages making it difficult for individual workers to compete for jobs and wages the bottom linestagnation is a period of little or no growth in an economy characterized by a growth of less than 2 3 annually as measured by gross domestic product gdp stagnation can be caused by business cycles shocks to the economy or the economic structure of a region governments commonly used both monetary and fiscal policies to reduce periods of prolonged stagnation | |
what is a stakeholder | a stakeholder is an individual or a group of individuals with an interest often financial in the success of a business the primary stakeholders in a corporation include its investors employees customers and suppliers with the increasing attention on corporate social responsibility the concept has been extended to include communities governments and trade associations investopedia laura porterunderstanding stakeholdersstakeholders can be internal or external to an organization internal stakeholders are people whose interest in a company comes through a direct relationship such as employment ownership or investment external stakeholders do not directly work for or with a company but are affected by the actions and outcomes of the business suppliers creditors and public interest groups are all considered external stakeholders stakeholder capitalism is a business concept that maintains that companies should serve the interests of all of their stakeholders not only their shareholders example of an internal stakeholderinvestors are internal stakeholders who are significantly affected by a company and its performance if for example a venture capital firm decides to invest 5 million in a technology startup in return for 10 equity and significant influence the firm becomes an internal stakeholder of the startup the return on the venture capitalist firm s investment hinges on the startup s success or failure meaning that the firm has a vested interest example of an external stakeholderexternal stakeholders do not have a direct relationship with the company but may be affected by its operations | |
when a company goes over the allowable limit of carbon emissions for example the town in which it is located is considered an external stakeholder because its residents may be harmed by the increased pollution | external stakeholders in some cases can have a direct effect on a company the federal government for example is an external stakeholder a policy change on carbon emissions affects the operations of any business that burns a significant amount of fossil fuel issues concerning stakeholdersa common problem is that the interests of various stakeholders may not align in fact they may be in direct conflict for example the primary goal of a corporation from the perspective of its shareholders is often considered to be the maximization of profits to enhance shareholder value since labor costs are unavoidable for most companies a company may seek to keep these costs under tight control this is likely to upset another group of stakeholders its employees the most efficient companies successfully manage the interests and expectations of all their stakeholders it is a widely held myth that public corporations have a legal mandate to maximize shareholder wealth in fact there have been several legal rulings including by the supreme court clearly stating that u s companies need not adhere to shareholder value maximization 1stakeholders vs shareholdersshareholders are only one type of stakeholder all stakeholders are bound to a company by some type of vested interest usually for the long term a shareholder has a financial interest but shareholders can sell their stock they do not necessarily have a long term need for the company and can usually get out at any time and reduce their losses others cannot the vendors in a company s supply chain might suffer if the company limits production and reduces or eliminates its services employees of the company might lose their jobs | |
what are the different types of stakeholders | examples of important stakeholders for a business include its shareholders customers suppliers and employees some stakeholders such as shareholders and employees are internal to the business others such as the business s customers and suppliers are external to the business but are nevertheless affected by the business s actions in recent years it has become common to consider a broader range of external stakeholders such as the government of the countries in which the business operates or the public at large | |
when a business fails and goes bankrupt there is a pecking order among various stakeholders in who gets repaid for their capital investment | secured creditors are first in line to be repaid they are followed by unsecured creditors preferred shareholders and finally owners of common stock who may receive pennies on the dollar if anything as this example illustrates not all stakeholders have the same status or privileges workers in a bankrupt company can be laid off without any severance | |
what are the stakeholders in a business | stakeholders in a business include any entity that has a vested interest in a company s success or failure first there are the owners of the business these can include hands on owners as well as investors who have passive ownership if the business has loans or debts outstanding these creditors including banks or bondholders will be the second set of stakeholders in the business the employees of the company are a third set of stakeholders along with the suppliers who rely on the business for their income customers too are stakeholders who purchase and use the goods or services the business provides | |
are stakeholders and shareholders the same | although shareholders are an important type of stakeholder they are not the only stakeholders other stakeholders include employees customers suppliers governments and the public at large in recent years there has been a trend toward thinking more broadly about who constitutes the stakeholders of a business the bottom linestakeholders are individuals organizations or other entities that have a vested interest in the success or failure of a company or an endeavor stakeholders can be internal or external and range from customers and shareholders to communities and even governments | |
what is a stalking horse bid | a stalking horse bid is an initial bid on the assets of a bankrupt company the bankrupt company will choose an entity from a pool of bidders who will make the first bid on the firm s remaining assets the stalking horse sets the low end bidding bar so that other bidders can t underbid the purchase price 1the term stalking horse originates from a hunter seeking concealment behind either a real or fake horse while stalking game 2 | |
how a stalking horse bid works | the stalking horse bid method allows a distressed company to avoid receiving low bids as it sells its final assets once the stalking horse bidder has made its offer other potential buyers may submit competing bids for the company s assets 3by setting the low end of the bidding range the bankrupt company hopes to realize a higher profit on its assets as bankruptcy proceedings are public they allow for the disclosure of more information about the deal and the buyer than would be available in a private deal 4a stalking horse bidder can generally negotiate which particular assets and liabilities it hopes to acquire advantages of a stalking horse bidas the stalking horse bid is the opening offer for the assets or company the bankrupt company typically awards several incentives to the stalking horse bidder these include expense reimbursements breakup fees and exclusivity for a specified period 5the stalking horse bidder also may negotiate the terms of the purchase choose which assets and liabilities it wishes to acquire and decide which executory contracts it is willing to cure and have acquired moreover the stalking horse bidder can negotiate bidding options that discourage competitors from bidding 5disadvantages of a stalking horse bidthe stalking horse bidder will exert great effort to gain the advantages of being the first bidder as this is the opening bid the stalking horse bidder must perform due diligence when determining its offer price and the fair value of the remaining assets the stalking horse bidder must invest time and resources to do this research the risk remains however that even with due diligence the price bid may be more than the value of the assets 5additionally there is risk associated with the stalking horse s bid being public another party can merely prepare and submit a slightly higher offer allowing it to capitalize on the stalking horse s due diligence also the stalking horse bidder may spend a good bit of time in negotiating the terms of the deal which will further raise overhead costs 5stalking horse bid examplesin april 2023 bed bath beyond filed for chapter 11 bankruptcy after several failed attempts to turn the business around and raise enough cash to cover expenses and stay afloat the retailer then had until june to choose a stalking horse bid for some or all of its assets 6eventually overstock com the online retailer known for its large furniture was chosen to set the floor for future bids overstock com bid 21 5 million for some of bed bath beyond s assets including its intellectual property business data rights to mobile apps and certain contracts other businesses were interested in picking up fewer assets such as just the retailer s domain name or certain assets associated with the wamsutta brand 67after the stalking horse bid was selected bed bath beyond s available assets went to auction in the end overstock com s bid proved to be enough overstock com bought the brand out of business and relaunched its website as bedbathandbeyond com 6meanwhile some of bed bath beyond s remaining assets were sold to other entities for example burlington stores bought most of the company s leases 8 and dream on me purchased buy buy baby s intellectual property assets 9it doesn t always end that way sometimes the stalking horse bid attracts lots of interest and the price gets pushed up for example in 2015 valeant pharmaceuticals international inc now bausch health companies inc placed a stalking horse bid for certain assets of bankrupt dendreon corp the initial offer was 296 million in cash on jan 29 2015 however due to other competitive bids the price increased to 400 million one week later 10at a bankruptcy hearing on feb 20 2015 the court formally approved valeant s role as a stalking horse bidder the company was entitled to receive a breakup fee and expense reimbursement if its bid was unsuccessful the court also set a deadline for additional bids ultimately the bankruptcy judge approved the sale to valeant for 495 million with a new deal including other assets 11 | |
is a stalking horse bid legally binding | yes as a stalking horse bid must be approved by a bankruptcy court it is legally binding 5 | |
what is a topping fee | a topping fee is a percentage of the difference between the winning bid and the stalking horse bid that must be paid to the stalking horse bidder this differentiates it from a breakup fee which is a set amount 12 | |
what is a stalking horse candidate | in politics a stalking horse candidate is a sham candidate put forward to conceal another candidate or divide the opposition 2 in a bankruptcy proceeding a stalking horse candidate is an interested buyer of the bankrupt company that is chosen by the company and put forward for approval by the bankruptcy court by being allowed to set the initial bid which other interested bidders cannot go below it does in a sense divide the opposition by perhaps making it less likely that they will bid at all if they consider the initial bid too high the bottom linea stalking horse is chosen by a bankrupt company to put in an initial bid on its assets the bankruptcy court must approve the choice and the bid the assets are then opened up to other bidders who must make a higher bid to succeed in acquisition of said assets being a stalking horse bidder has its perks which include having control of many aspects of the bidding situation and fail safe fees in the event that its bid doesn t win however the downside is that the role comes with higher initial costs incurred by extensive negotiations and conducting due diligence upon which other bidders can then capitalize in making their bids | |
what is standard poor s s p | standard poor s s p is a company well known around the world as a creator of financial market indices widely used as investment benchmarks a data source and an issuer of credit ratings for companies and debt obligations it s perhaps best known for the popular and often cited s p 500 index the company s roots date back to the 1860s since 2016 its official corporate name has been s p global 1understanding standard poor s s p standard poor s grew out of two companies poor s publishing a publisher of railroad industry guidebooks officially founded in 1868 and the standard statistics bureau later company founded in 1906 which published financial data on companies in 1923 it released its first stock market indicator which contained 233 companies poor s publishing meanwhile issued its first rating in 1916 the two firms merged in 1941 to create standard poor s 2the mcgraw hill cos purchased s p in 1966 in 2012 standard poor s combined its index operations with dow jones indices which mcgraw hill owned to become the leader in stock market indexes in 2016 mcgraw hill financial rebranded itself as s p global s p global divisions include s p global ratings s p global market intelligence s p dow jones indices and s p global platts 2 the company has more than 1 500 credit analysts and more than 1 million credit ratings have been issued on governments corporations the financial sector and securities 6s p is a major credit risk researcher covering multiple industries benchmarks asset classes and geographies it issues credit ratings ranging from aaa to d on public and private company debt as well as governments it also offers ratings on short term debt and provides outlook ratings that range from six months to two years 65s p s major competitors for credit ratings include moody s and fitch and for financial indices bloomberg general business services 78standard poor s indexesthe s p 500 index launched in march 1957 it was the first index to be computer generated and to be published daily and has become a stand in for the u s stock market itself 2the s p 500 index contains 500 of the largest stocks that trade on the new york stock exchange nyse and nasdaq making it a tool to gauge the overall health of large american companies the s p 500 is probably the single most popular equity index in the world and is used as a performance benchmark for a variety of mutual funds etfs and other assets and securities other popular indexes offered by s p global cover different sectors of the market and different market capitalizations large offerings from s p dow jones indices include the s p smallcap 600 the s p midcap 400 the s p composite 1500 and the s p 900 each represents a look at market health based on its sub sector 9s p 500 index futuresthe first s p 500 futures contracts were introduced by the chicago mercantile exchange cme in 1982 and carried a notional value of 250 times the value of the s p 500 the cme added the e mini contract valued at 50 times the s p 500 in 1997 to allow for smaller investments by a wider range of investors 10 the even smaller micro e mini with a multiplier of just 5 was introduced in 2019 11the e in e mini stands for electronic a reflection of the fact that when e minis were launched in 1997 they traded exclusively on cme globex cme s electronic trading system rather than in open outcry pits like other futures contracts 10 many traders favored the e mini over the standard contract not only for its smaller investment size but also for its liquidity consequently cme delisted the standard contract in september 2021 12as with all futures investors are only required to front a fraction of the contract value to take a position this represents the margin on the futures contract these margins are not the same as margins for stock trading futures margins show skin in the game that must be offset or settled standard poor s underlying ratings spurs standard poor s underlying ratings spurs provide an opinion on a municipality s credit quality separate from guarantor or insurer credit enhancements municipal or other public sector bonds typically include credit enhancement which is used to obtain better terms by providing increased assurance that the borrower will honor its obligation through additional insurance or a third party guarantee standard poor s issues a spurs rating only at the request of the issuer obligor and maintains surveillance of an issue with a published spur 13example of standard poor s ratingsstandard poor s global ratings division ranks debt instruments like bonds and the companies that issue them in terms of creditworthiness defined as the likelihood of default or inability to pay debts in a timely manner similar to academic grades each rating consists of a letter on a scale of a to d sometimes augmented with a plus or minus sign or a number the higher the grade the lower the risk in s p s estimation a rating of bbb and above is called investment grade the safest sort of investment ratings below that are considered speculative a greater degree of risk the chart below displays standard poor s rating system for short term debt bills loans and other obligations with a maturity of one year or less 14 these are the sort of instruments that money market funds and money market accounts often invest in | |
what does standard and poor s mean | standard poor s s p is a company a leading index provider and data source of independent credit ratings the name comes from the 1941 merger of two financial data publications henry varnum poor s publication on railroad prices dating back to 1860 and the standard statistics bureau which was founded in 1906 sometimes a reference to standard poor s can also mean the company s most famous index the s p 500 which tracks the performance of the 500 largest public companies in the u s 2 | |
how does standard and poor s make money | standard poor s is paid fees for its rating services by issuers of securities and debt obligations in addition companies and individuals often pay for its more detailed market intelligence and analysis reports and subscribe to other research services 15 | |
what companies are in the s p 500 | the s p 500 consists of the 500 largest publicly traded companies in the u s many are highly familiar names microsoft apple exxon mobile bank of america visa and coca cola to qualify for the s p 500 index a company must have at least 10 of its shares outstanding in the public market and have a market capitalization of at least 14 6 billion 16 | |
how do i find a company s s p credit rating | you can find a company s s p rating by going to the s p global ratings website once you register for free with s p global ratings website you can then look up a company 17 | |
is bbb investment grade | yes bbb does indicate investment grade it is the lowest s p rating to qualify as investment grade it means a bond or an issuer exhibits adequate protection parameters however adverse economic conditions or changing circumstances are more likely to weaken the obligor s capacity to meet its financial commitments on the obligation as s p puts it 14the bottom linestandard poor s officially s p global is a public company in the financial information and analytics business based in the u s but with offices around the world it provides financial market research and intelligence maintaining widely followed market and securities indexes the best known of which the s p 500 index acts as a barometer of the entire u s stock market in addition standard poor s is one of the largest credit rating agencies assigning letter grades to companies and countries and the debt they issue 18 | |
what is standard deduction | the standard deduction is the portion of income not subject to tax that can be used to reduce your tax bill for 2023 the standard deduction was 13 850 for individuals 27 700 for joint filers or 20 800 for heads of household the standard deduction in 2024 is 14 600 for individuals 29 200 for joint filers and 21 900 for heads of households 12understanding the standard deductionthe internal revenue service irs allows you to take the standard deduction if you do not itemize your deductions using schedule a of form 1040 to calculate taxable income the amount of your standard deduction is based on your filing status your age and whether you are disabled or claimed as a dependent on someone else s tax return 3income tax is the amount of money that the federal or state government takes from your taxable income it is important to note that taxable income and total income earned for the year are not the same this is because the government allows a portion of the total income earned to be subtracted or deducted to reduce the income that is taxed taxable income is usually smaller than total income due to deductions which help lower your tax bill 45to qualify as blind you must have a certified letter from an eye doctor stating that you have non correctable 20 200 vision in your best eye or that your field of vision is 20 degrees or less 6the irs allows taxpayers to choose between two different types of deductions a set of itemized deductions and the standard deduction the standard deduction is a certain figure set by the government that can be subtracted from your taxable income | |
when you claim this figure on your annual tax return it reduces the amount of income on which you re taxed the standard deduction is updated annually for inflation and reflects your tax filing status 3 | you can take advantage of an additional standard deduction if you are 65 or over at the end of the tax year you are considered to be 65 on the day before your 65th birthday people who are blind may claim an additional deduction provided they are blind on the last day of the tax year 73if you can be claimed as a dependent on someone else s tax return your standard deduction for 2023 was limited to the greater of 1 250 or your earned income plus 400 up to the amount of the basic standard deduction for your filing status for 2024 these numbers are 1 300 and 450 respectively 78standard deduction amounts for the most current tax years are listed below special considerationsnot all taxpayers qualify for the standard deduction which means these individuals can t claim this deduction you can t claim it if you if the total value of itemized deductions is higher than the standard deduction you would itemize otherwise you should opt for the standard deduction 9students and business apprentices from india may be eligible to claim the standard deduction under article 21 of the u s india income tax treaty 10standard deduction amountsnew standard deduction amounts were introduced by the tax cuts and jobs act at the end of 2017 and nearly doubled the previous amounts they are set to expire on dec 31 2025 11here are the standard deduction amounts for the 2023 and 2024 tax years 12as noted above the federal income tax system and some states have higher standard deductions for people who are at least 65 and for people who are blind under federal guidelines if you are 65 or older or you are blind you can claim an additional standard deduction 37standard deductions for an individual being claimed as a dependent could not be more than 1 250 or a total of 400 plus the individual s earned income for 2023 for 2024 these numbers are 1 300 and 450 respectively 87you can also increase your standard deduction by the net amount of a disaster loss but the loss must happen in a federally declared disaster area 12standard deduction vs itemized deductionsthe biggest reason taxpayers use the standard deduction instead of itemized deductions is that they don t have to keep track of every possible qualifying expense throughout the year many people may also find the standard deduction amount greater than the total that they could reach if they added up all their eligible tax deductible expenses separately this may be especially true given that the tax cuts and jobs act limited total state and local tax deductions to 10 000 13it also limited the mortgage interest deduction on properties bought after dec 15 2017 to the first 750 000 of debt 375 000 if married filing separately the limit was 1 million under previous rules 14whether you use the standard deduction or itemize your deductions is up to you but you cannot do both the itemized deduction option allows you to list all your tax deductible expenses for the year such as | |
what is the standard deduction for 2024 | for tax year 2024 the standard deduction is 14 600 if you file as single or married filing separately it s 21 900 for heads of household and 29 200 for married filing jointly or qualifying widow er taxpayers 2 | |
what was the standard deduction for 2023 | for tax year 2023 the standard deduction was 13 850 if you filed as single or married filing separately it was 20 800 for heads of household and 27 700 for married filing jointly or qualifying widow er taxpayers 1 | |
what can i deduct if i take the standard deduction | you can claim above the line deductions including retirement plan contributions health savings account hsa contributions alimony educator expenses student loan interest and health insurance premiums for individual health insurance policies if you are self employed 161718192021the bottom linethe standard deduction is a fixed dollar amount that taxpayers can subtract from their adjusted gross income to reduce their taxable income it s available to taxpayers who do not itemize deductions and the amount you get to deduct varies depending on filing status and other factors | |
what is standard deviation | standard deviation is a statistical measurement of the dispersion of a dataset relative to its mean if data points are further from the mean there is a higher deviation within the data set it is calculated as the square root of the variance investopedia alex dos diaz | |
what does standard deviation measure | standard deviation is a statistical measurement in finance that when applied to the annual rate of return of an investment sheds light on that investment s historical volatility the greater the standard deviation of securities the greater the variance between each price and the mean which shows a larger price range for example a volatile stock has a high standard deviation while the deviation of a stable blue chip stock is usually rather low standard deviation formulastandard deviation is calculated by taking the square root of a value derived from comparing data points to a collective mean of a population the formula is standard deviation is calculated as follows | |
why is standard deviation a key risk measure | standard deviation is an especially useful tool in investing and trading strategies as it helps measure market and security volatility and predict performance trends as it relates to investing for example an index fund is likely to have a low standard deviation versus its benchmark index as the fund s goal is to replicate the index on the other hand one can expect aggressive growth funds to have a high standard deviation from relative stock indices as their portfolio managers make aggressive bets to generate higher than average returns a lower standard deviation isn t necessarily preferable it all depends on the investments and the investor s willingness to assume risk when dealing with the amount of deviation in their portfolios investors should consider their tolerance for volatility and their overall investment objectives more aggressive investors may be comfortable with an investment strategy that opts for vehicles with higher than average volatility while more conservative investors may not standard deviation is one of the key fundamental risk measures that analysts portfolio managers and advisors use investment firms report the standard deviation of their mutual funds and other products a large dispersion shows how much the return on the fund is deviating from the expected normal returns because it is easy to understand this statistic is regularly reported to the end clients and investors key properties of standard deviationone key property of standard deviation is additivity which means that the standard deviation of a sum of random variables this property allows researchers to accurately quantify the variability of aggregated data and make meaningful comparisons between different groups or populations as opposed to only analyzing single points of data another property of standard deviation is scale invariance this is particularly useful in comparing the variability of datasets with different units of measurement for example if one dataset is measured in inches and another in centimeters their standard deviations can still be compared directly without needing to convert units last standard deviation has properties of symmetry and non negativity this means a standard deviation is always positive and symmetrically distributed around the mean this symmetry property implies that deviations above the mean are balanced by deviations below the mean resulting in a total balance of the entire data set the property of always being positive means a standard deviation has a higher degree of comparability when looking at standard deviations across data sets standard deviation vs variancevariance is derived by taking the mean of the data points subtracting the mean from each data point individually squaring each of these results and then taking another mean of these squares standard deviation is the square root of the variance all these calculations can be accomplished quickly using software like excel the variance helps determine the data s spread size when compared to the mean value as the variance gets bigger more variation in data values occurs and there may be a larger gap between one data value and another if the data values are all close together the variance will be smaller however this is more difficult to grasp than the standard deviation because variances represent a squared result that may not be meaningfully expressed on the same graph as the original dataset standard deviations are usually easier to picture and apply the standard deviation is expressed in the same unit of measurement as the data which isn t necessarily the case with the variance using the standard deviation statisticians may determine if the data has a normal curve or other mathematical relationship if the data behaves in a normal curve then 68 of the data points will fall within one standard deviation of the average or mean data point larger variances cause more data points to fall outside the standard deviation smaller variances result in more data that is close to average the standard deviation is graphically depicted as a bell curve s width around the mean of a data set the wider the curve the larger a data set s standard deviation from the mean business use cases of standard deviationsthere s a very diverse range of use cases in business where analysts or companies can use standard deviations some of the more common business uses may include strengths of standard deviationstandard deviation is a commonly used measure of dispersion many analysts are probably more familiar with standard deviation than compared to other statistical calculations of data deviation for this reason the standard deviation is often used in a variety of situations from investing to actuaries standard deviation is all inclusive of observations each data point is included in the analysis other measurements of deviation such as range only measure the most dispersed points without consideration for the points in between therefore standard deviation is often considered a more robust accurate measurement compared to other observations the standard deviation of two data sets can be combined using a specific combined standard deviation formula there are no similar formulas for other dispersion observation measurements in statistics in addition and unlike other means of observation the standard deviation can be used in further algebraic computations meaning there s some versatility to standard deviation limitations of standard deviationthere are some downsides to consider when using standard deviation the standard deviation does not actually measure how far a data point is from the mean instead it compares the square of the differences a subtle but notable difference from actual dispersion from the mean outliers have a heavier impact on standard deviation this is especially true considering the difference from the mean is squared resulting in an even larger quantity compared to other data points therefore be mindful that standard observation naturally gives more weight to extreme values last standard deviation can be difficult to calculate manually as opposed to other measurements of dispersion such as range the highest value minus the lowest value standard deviation requires several cumbersome steps and is more likely to incur computational errors compared to easier measurements this hurdle can be circumnavigated through the use of a bloomberg terminal consider leveraging excel when calculating standard deviation after entering your data use the stdev s formula if your data set is numeric or the stdeva when you want to include text or logical values there are also several specific formulas to calculate the standard deviation for an entire population example of standard deviationsay we have the data points 5 7 3 and 7 which total 22 you would then divide 22 by the number of data points in this case four resulting in a mean of 5 5 this leads to the following determinations x 5 5 and n 4 the variance is determined by subtracting the mean value from each data point resulting in 0 5 1 5 2 5 and 1 5 each of those values is then squared resulting in 0 25 2 25 6 25 and 2 25 the square values are then added together giving a total of 11 which is then divided by the value of n minus 1 which is 3 resulting in a variance of approximately 3 67 the square root of the variance is then calculated which results in a standard deviation measure of approximately 1 915 or consider shares of apple aapl for a period of five years historical returns for apple s stock were 88 97 for 2019 82 31 for 2020 34 65 for 2021 26 41 for 2022 and as of mid april 28 32 for 2023 the average return over the five years was thus 41 57 1the value of each year s return less the mean were then 47 40 40 74 6 92 67 98 and 15 57 respectively all those values are then squared to yield 22 47 16 60 0 48 46 21 and 2 42 the sum of these values is 0 882 divide that value by 4 n minus 1 to get the variance 0 882 4 0 220 the square root of the variance is taken to obtain the standard deviation of 0 4690 or 46 90 |
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