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Unit 2: The Stock Market

Unit 2: The Stock Market. Lesson 10: Options and Shorts. Lesson Objective. SWBAT describe how to use options and shorts to guard their investments and take advantage of unfavorable economic conditions. WOTD/Initial Activity. Leverage

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Unit 2: The Stock Market

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  1. Unit 2: The Stock Market Lesson 10: Options and Shorts

  2. Lesson Objective • SWBAT describe how to use options and shorts to guard their investments and take advantage of unfavorable economic conditions.

  3. WOTD/Initial Activity • Leverage • the exertion of force by means of a lever or an object used in the manner of a lever. • use borrowed capital for (an investment), expecting the profits made to be greater than the interest payable. • Initial Activity • Is it possible to profit when the economy is sinking towards recession rather than growing? • How would you try to protect your portfolio from losing money when the economy is doing poorly?

  4. Activity 1: The Short Sale • Focus Question: How do investors take advantage of negative economic news by using short sales? • Read Short Sales • When would you want to short sell a stock? • How does short selling work? • Why is short selling a risky practice? • What is a short cover? • Share Out

  5. The Short Sale • Quickwrite Could you see yourself using short sales in the stock market game? How does risk vs. reward relate to short sales? • Share Out & Discuss

  6. Activity 2: Options • Focus Question: How do investors use the economic indicators published by the Federal Reserve to choose which stocks to invest in? • Read How Options Work • How can you make money from the use of options? • What is a call? What is a put? • How do options work? • Share Out

  7. Summary Discussion • Why would investors use options and shorts? • What is the inherent risk and reward in using these strategies?

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