Overview of Broad Markets

Money changes hands every day affecting companies and the lives of many in these markets. Stocks are not the only things sold in the broad financial markets. There are other key markets to be aware of and to consider investing in to turn a profit.

Stock Markets

In the U.S. stock market, numerous local and international corporations have their stocks traded publicly. Profit is made when stockholders purchase stocks and resell them at a later time for a price higher than their initial investment. Stockholders actually own a portion of the company. The three major stock exchanges in which professional stock brokers participate in the United States are:

  • The New York Stock Exchange (NYSE)
  • The National Association of Securities Dealers Automated Quotation System (NASDAQ)
  • The American Stock Exchange (AMEX)

Futures Markets

Futures trading is where a financial contract is traded in which you try to predict the future value of a commodity that must be delivered at a specific time in the future. The largest commodity exchange in the United States is the Chicago Mercantile Exchange. Commodities include any product that can be bought or sold. Most likey, you’ll sell the futures contracts before you actually have to accept the commodity from the commercial customer.

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Bond Markets

Bonds are loan instruments. Companies sell bonds to borrow cash. If you buy a bond, you’re essentially holding a company’s debt or the debt of a governmental entity. You will be paid a certain amount of interest for a specific period of time in exchange for the use of your money. Bonds are considered safer than stocks because if a company files bankruptcy, its bondholders are paid before the stockholders. Bonds are primarily handled by large institutional traders.

Options Markets

An option is a contract that gives the buyer the right, but not the obligation, either to buy or to sell the underlying asset upon which the option is based at a specified price on or before a specified date.