Centre Democrat. [volume] (Bellefonte, Pa.) 1848-1989, 1881-03-17
HOW IT N DONE.
TnE MoDus oPERAsDI OF THE NEW YORK
STOCK EXCHANGE.
fDf he Hosfa

I
ing are q mystery 10 those who have
not taken hand. The person who
wants to speculate does not know
where to begin or how to take the
first step. How much money must
he put up as a margin? What does
the broker do, and how much must
the broker be paid for making the
purchases These are constantly re-
curing questions. Dozens of letters
are sent TO New York newspapers on
the subject, and the writers seem to
imagine that there is something very
mysterious about the whole business.
As matter Of fact the reverse is the
truth. Nothing is simpler than a
purchase for rise. Selling stocks
short is ust trihe complicated TO a
novice, but is easy TO understand.
The beginner usually starts his specu-
Iative career hy purchasing 100 shares
of stock, although less number may
be bought. He seeks a Trustworthy
broker, and is told that TO purchase
| 100 shares, he must deposit with the
broker 8 or 10 per cent. of the par
value of the stock. Dealings in the
New York Exchange are so scaled
that 10 per cent. means 81 900, and
most brokers require this sum from
strangers. This deposit is called the
margin. The broker then opens an
account with him by placing 81 900
to the credit Of the customer. The
next step is for the customer to select
stock that is likely to advance, and
having made up his mind that Erie,
for instance, is the card, he simply
says to the broker: Buy me 100
shares Of Erie" off goes the broker
like shot TO the Stock Exchange,
where he dives iuto crowd Of one
thousand other brokers. The floor of
the great room has upon it score or
more of knots Of men, pushing, surg.
ing and yelling at the top Of their
lungs. One knot is the St Paul
F clique, another the Reading clique,
third the Erie crowd. Our broker
rushes into the Erie coteric, elbows
men out Of the way, holds his right
hand high in air, and knowing that
/ the one man about whom the crowd j.
surging has some Erie stock to sell,
and hearing a dozen other men, with
their hands in the air, yelling 39!, +"
be jumps up in the air higher than all
the othefs and yells 40" Thereupon
the centre Of the group makes rush
at him and shouts, Sold" All this
means that our broker has offered to
pay $40 share for 100 shares of Erie,
and the other man has sold ii to him,
the other brokers having bid only
s39.S7I for it. The two brokers iot
down the transaction in their memoir
andum books, and the broker who
sold it reports the sale. Instantly is
flashed over the wire and into every
brokers office in the city the new
quotation for Erie of 80. The broker
who sold rolls up 100 share certificates
of Erie and sends them to our broker,
who puts them in his safe and sends
back a check for $4,000, the price of
the stock.
Our new customer then "holds 100
Erie. d" lie may hold" it as long a.
he pleases so long as the price of Erie
advances. If Erie is in demand the
price will advance. When it is quoted
at IL it has advanced 81 share, and
our friend is 800 ahead in the trans
action, that is, he would be were il not
for the brokers' commission, which is
per cent. for buying and I for selling.
total of for both buying and sell
ing, which to our friend would be s25:
hence the net profit at II would be
s75. AT 10 it would be S475. If the
stock is held longer than the day of
the purchase the customer must paw
interest on the $4,000, the Gust of the
stock. at 6 per cent. When the Gus
toner decides that he has made sufFi-
cient profit from the transaction he
simply says: "Sell my 100 shares of
Erie" and the broker sells it. If the
sale is at 45 the customer is credited
with the profit, less commission and
interest he then has l400 and some
odd dollars, which stands for margin
in his next transaction or he may
withdraw all his money and close the
account. After two or three such
operations his capital has doubled,
aud then, instead of 100 shares he
may purchase 200. Many a beginner
has increased his original of 81 900 to
s2C, 900, and even $4,000, and then.
becoming less cautious in his opera
tons, has found himself with 5000
shares of stock on hand, when there
came a crash and he lost all. Stocks
90 down so much easier than they ad- |
vance that the profits Of = twelve
month may be wiped out in twelve |
hours. The beginner invariably oper.
ates for rise. He can understand
that paying 40 for Erie and selling it |
for 45 means $500 proft. less com. |