Public ledger. [volume] (Memphis, Tenn.) 1865-1893, 1882-03-03
sPECULATION.
The "Long'' aud aShOrt' ofOper.
atiOns in the stock Market
Technical Terms and Their
Meaning.

Boston Herald.l
Speculative transactions, as dis,
tinguished from regular Investment
dealings, are those conducted on
margins" and in which the operator
does not pay or receive the actual
price of the stocks bought or sold, but
simply places a sufficient margin in the
hands of his broker usually 10 per
cent of the par value) to protect the
latter against loss from fluctuations in
the price, A party who purchases
stocks in anticipation of a rise, but
pays the actual price thereof, is not,
according to the usual acceptance Of
the term, engaged in speculation. 1t
should be clearly unders TODD that the
ultimate responsibility in stock opera.
tions is with the customer. He runs
the risk of the failure of his own
broker; nor can he hold him respon-
sible for losses occasioned by the fraud
or failure Of others with whom he had
made contracts. The broker stands
in the position of an agent acting for
his principal, and the customer should,
therefore, be careful to deal only
through brokers of integrity and re-
sponsibility.
THE GREAT CENTRAL POINT
in stock speculation, about which the
whole business revolves, is the fact
that, on the purchase or sale of the
usual amount oil 100 shares of stock,
representing a par value of $4,000,
each huctuation of / per cent from the
purchase price occasions a gain or loss
of 500, and this is the same whether
the purchase is at 9 price above or
below par. Next comes the question
Of interest. which is charged on the
actual amount that the stock costs,
plus the brokers' commission for buy
ing, and is usually at the rate Of Z per
cent to customers, though higher rates
are charged when the money market
is in such a condition that money for
carrying stocks commands higher fig
ures. Following the matter Of interest
comes that of commissions, which are
fixed in speculative transactions at
one eighth of l per cent on the par
value Of the stock, amounting to $l2 so
for buying 100 shares of stock, and the
same for selling, thus making the cost
Of one turn" in stocks just $25.
Dividends paid during the tendency
of a contract always go to the nominal
owner of, the stock. There are four
kinds of operations ordinarily carried
on in the large cities of the country
which have Stock Exchanges. The
first is buying for a rise, or going
long on stocks the second is selling
for a decline, or going short; the
third is buying or selling as above.
but on options; the fourth, which is
not usually recognized by regular
Stock Exchanges, is buying or selling
privileges" generally known as
puts" calls aud spreads" Buying
for a rise is by far the most ordinary
transaction with the non-professional
spectators. In this case the u
toner usually deposits $1,000 in his
brokers' hands as a 10 per cent mar
gin" on 100 shares Of stock which he
orders to be purchased, and which his
broker holds or carries" for him, in
order to sell the same, or until the
margin is about exhausted. In the
latter case, if the customer, on request,
fails to put up more margin, the broker
is at liberty to sell the stock imme
diately and charge him with the loss,
if any. Interest is charged the Gus.
toner on the purchase price, with
buying commission added, usually at
7 per cent as long as the stock is car
ried, or a higher rate if there is a tight
money market. A party carrying
stocks for a rise is said to be "long" Of
the market, or a bull
SELLING FOR A DECLINE,
or going short" Of stocks (being a
"bear'), is also a very common trans
action, and is simply the opposite Of
buying, as explained above, except
that the seller, not having the stock,
is obliged to borrow it for present de-
livery, and take the risk of buying it
back at a future day to return to the
lender. Aside from the ordinary
fluctuations of the market, the chief
risk in thus selling short" is the
chance Of a corner" in the stock, in
case a clique gets hold of it and forces
prices up to extraordinary figures,
but this is an operation that rarely
occurs. AS a general thing nothing
is paid for the use of the stock; but il
it is scarce, a consideration has to be
paid for its use from day to day
Margins and commissions arc the
same as in the first case. Buying OIL
selling on options is a transaction
in which the purchaser or seller, al
the agreement may be. has the option
to call for or tender the stock, at the
price named, at any time within the
period limited by tho contract
but the Stock Exchange doe,
not recognize contracts running
over GO days. Thus, a party antici
pating a rise in stocks purchases 10(
shares, buyer &c." or on his option t
call for the delivery Of the stock a
any time within thirty days at thu
/, price named; this price is usual!
somewhat above the current price a
the time. If a decline in stocks i
expected, a sale is similarly made
seller 3d." or at sellers option t,
} deliver at any time within thirty day
at the price named, and the price i
usually more or less below the marker
at the time. In purchases on buyer
: option (for any time ovcr three days
the buyer is charged with interest OIL
the price Of the stock till he choose
; to tenderit. In sales at sellers optior
the seller is credited with interest OF
. the price Of the stock till he choose
! to tender it. At the end Of tn,
, optional period the seller is obliged t
deliver, and the buyer to receive, tn
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