Averaging

A speculative term; increasing purchases or sales, as of stocks, when the market is pursuing an adverse course, for the purpose of improving the position of the buyer. or seller in the matter of price. Illustration: One hundred shares of stock are purchased at Too and the price declines to 98. At the last named figure 100 shares more are purchased, which makes the average price for; the 200 shares 99. Then, if a recovery to 99 takes place the operator is even; if it extends to 100 he has a profit. bl 7 ~~ 1 Again, 100 shares of stock are sold short at 100 and the price advances to 102. At the last-named figure 100 shares more are sold, which makes the average price for the 200 shares 101. Then if a reaction to 101 takes place the operator is even; if the reaction extends to 100 he has a profit. | Averaging out. A speculative term, meaning to conclude a trade or venture, as in stocks, without lo and perhaps with a profit by the proce of averaging; see Averaging. Award. To a ign or allot, as to award stock to a member; of an underwriting syndicate. Also, an award is the decision given by an arbitrator in a matter (as a busine transaction) which was referred to him for settlement. B. | B. As printed on the tape by the stock ticker this letter means bonds or cla B or (when accompanied by figures) bid or buyer. A bid alone (without an offer) is followed by the letter B, thus: RG. 75. B, meaning that 75 was bid for Reading stock. A bid and offer are separated by @, thus: 75@I-2, meaning that 75 was bid for the stock and that is was offered at 75 1-2. (On / some tickers three dots... are used in place of @). A transaction buyer 4, I0, 20, 30 or 60 is recorded (printed) thus: RG. 75. B4. (or 10, etc.), meaning that Reading stock sold at 75 and that the buyer may on one day’s notice to the seller call for the delivery of it at any time within 4 days (or 10 days, etc.); see Buyer’s option. Back. Abbreviation of backwardation; see Backwardation. Backing. As applied to a bill of exchange or a promi ory note backing means indorsement; see Indorsement. Back spread. A term used in an arbitrage operation in a commodity (grain, cotton or coffee, etc.) and also in a stock when different prices prevail normally as well as from fluctuations for the same thing in different markets. The thing is bought in one market and simultaneously sold in another, to be subsequently sold where is was bought and simultaneously bought where it was sold. In grain there is normally a difference in price between two markets equal to the cost of transporting the grain from the market where the lower price prevails to the market where the higher price prevails. To permit a back spread the difference in price between the two markets must be le than the normal difference. As an example of a back spread grain may be sold in Chicago and bought in New York if the price in New York is not sufficiently above the price in Chicago to equal the cost of transportation of the grain from New York to Chicago. The normal difference between Chicago and New York in, the price of wheat is, say, 6 cents a bushel—that is, wheat is normally 6 cents a bushel lower in price in Chicago than in New York. Say a difference of 4 cents, or 2 cents le than the normal difference, is found to exist. The speculator buys in New York and sells in Chicago. If the Chicago price remains stationary while the New York price advances 2 cents the speculator sells in New York and makes 2 cents a bushel on the transaction there, while he sells in Chicago and neither gains nor loses on the transaction there. Or, if the Chicago price drops 1 cent and the New York price advances 1 cent he buys in Chicago and makes 1 cent a bushel on the transaction there and he sells in New York and makes 1 cent a bushel on the transaction there. A back spread is distinguished from a spread from the fact that in a back spread the difference in price between the two markets is le than the normal difference, whereas in a spread the difference in price between the two markets is greater than the normal difference; see Spread. A back spread between Liverpool and New York or between Liverpool and Chicago or between any market in one country and any market in any other country is effected in the same manner as a back spread between Chicago and New York. Likewise, a spread in cotton, coffee or any other commodity is effected in the same manner as in grain. ~ baad - For information as to a back spread in an arbitrage operation in a stock see Arbitrage. 44