Write explanatory notes on the following Stock Exchange terms
(a) Bull (b) Bear (c) Option (d) Backwardation (e) Contango
Explanation
(a)Bull:
(i) This is a speculator on the stock exchange.
(ii) He buy shares on the stock exchange in the expectation that the price will rise preferably before. The end of the account so that he can sell at a higher price to make profit.
(b) Bear:
(i) This is a speculator on the stock exchange.
(ii) He sells shares he does not have at a high price today with the hope that the price will fall before he had to deliver the shares, he will then buy the shares for delivery to make profit.
(c) Option:
(I) This is a chance to buy or sell a share at an agreed price and at an agreed future time.
(ii) Options are particularly useful at times of uncertainty.
(iii) An option to buy is know as a call option while the option to sell is known as put option.
(d) Backwardation:
(i) This is a penalty paid to a stock broker by a seller of shares who fails to deliver on the agreed date.
(ii) The transaction is fore closed and the price differential is debited to the sellers account
(e) Contango:
(i) This is a stock exchange term meaning postponement of payment until the next account.
(ii) It is also used to signify the extra charge paid by buyer of security for delaying payment.
(iii) The day of payment is called contango day.