Can somebody please explain "stocks" in laymen terms?

they dont

theyre people who buy and sell stock as a job ( i believe its mostly electronic now a days and that pit doesnt really exist today but dont hold me to that) those people had to yell out what that were buying and selling its a rush like that when stock are rising or falling fast thus the panic, buy low and rising get more profit when it peaks… when its dropping, sell as fast as possible. theyre yelling to the official stock exchangers.

or at least thats my take on it

@kibaxcheza thanks. i mean, the financial arena in that scene seemed so haphazard, is it really so sloppy?

A stock is a share in a company. It is literally a small (usually very small) part ownership in a company. If the company grows the value of the stock goes up. If the company falters, the value of the stock goes down.

The people in the pit don’t set the direction of the economy, although the can profit whether the economy is going up or going down.

In relation to futures, if they believe that orange juice futures are going to be higher priced tomorrow, they will buy some today and maybe sell tomorrow at a profit. If the pit traders believe orange juice futures are going to be cheaper tomorrow, they can “go short” which means they sell the futures today and buy them back tomorrow (still buying low and selling high).

guess i’m trying to say how to explain the frenzy to an 11-year-old. you know?

Futures are not stocks. They are commodities. Essentially you make a contract to buy an amount of oranges on a given date for a given price. If the price rises, you sell at a profit. You have just traded an orange future. If the price falls, you sell and you lose money. You have just traded an orange future. If you believe the price will go down, you sell the future at a higher price, and retrieve the difference. If you don’t sell, you take delivery of a whole lot of oranges.

Stocks are actual shares in the companies. You buy the shares, you own a piece of the company. If the company does well, so do you.

@PerryDolia oh wow. so in other words…
it’s a gamble? like vegas but for real. it’s a feeling. no?

@charliecompany34 The frenzy is caused by two things: 1. The pit has people who buy and sell lots of different things, so the are very busy, and 2. time is of the essence, when people what to buy or sell they want the price right now either because it is going their way or it is not, either way they want immediate action.

Puritans used stocks as an instrument of punishment in colonial America. They were made of wood and would lock around the prisoner’s head and hands keeping him or her immobile. They were placed in public place where the locals would often kick and spit at them as well as hurl insults.

@charliecompany34 Well, some people think of it as gambling. It certainly has uncertainty and risk, like gambling. But, if you are a student of some of the math involved in investing, it can be more of a science, like predicting the weather, not always right, but often right, which takes some of the random risk out and can give reasonable returns.

I use to use the description of a five lane freeway, lanes are the different stocks, and some go faster than others, some people only concern themselves with which lane is moving the fastest, making more money. Some times there are crashes, blah blah I could have really done something with this answer but I’m exhausted, just watched (500) Days of Summer, and it made me very, sentimental.

Invent a concrete example for him, using M & M’s as currency. Wager that the mailman will come early, on-time or late. You could then work out who earned more M & Ms and who lost.

@gailcalled- Can it be Peanut M&M’s®? I love those!

In the last scene of Trading Places, they are trading futures contracts in the commodities market (different from stocks). Commodities futures are contract to buy whatever commodity (frozen concentrated orange juice, pork bellies, sugar, corn, wheat, soy beans, lumber, etc) at a certain price for delivery on a certain day (march contract, april contract, etc.) Once you have bought a futures contract (which, incidentally is a large amount of stuff), you can either sell it before the delivery date, or else, you have to actually take delivery of your goods. Businesses buy their commodities this way.

Stocks are partial shares of a publicly traded company. Like GE may have a float of 10.65 billion shares outstanding each worth $15.79 today. If you own one of these, you own 1/billionth of the company. Price per share goes up or down based on the investor’s opinion of the value of that share (how much would the company be worth if it sold right now).