NOTE. One day's notice is required of intention to close an option of more than 3 days. Any of these contracts of 3 days or less carry no interest; but, if the contract is greater than 3 days, interest on the market price of the stock for the expired time is paid from buyer to seller.

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207. In addition to the above ways of buying and selling stock, there are contracts known as PUTS,' "CALLS," "SPREADS," and "STRADDLES," for which the buyer pays a certain sum (usually 1% of par for each privilege given him) and agrees to take or deliver the stock, if to his advantage to do so.

A PUT is a contract by which the holder is entitled to deliver to the seller of the privilege a certain number of shares of a specified stock at a fixed price within a certain time.

NOTE 1. Puts are bought with the expectation of a decline in the price of stock, and the price specified in the contract is usually less than the market price of the stock at the time the contract is made. If the stock decline below the specified price, the holder can buy at the depreciated price and sell at the specified price, thus netting a profit, if the difference is more than enough to pay expenses.

NOTE 2.

The expenses of the buyer of the Put are usually 1% premium paid the seller, %% paid the broker for securing the contract, and 1% paid the broker on the transfer of the stock. If the stock does not decline the holder loses the 1% and 7% by refusing to deliver.

A CALL is a contract by which the holder is entitled to call upon the seller of the privilege for a certain number of shares of a specified stock at a fixed price within a certain time.

NOTE 1. Calls are bought with the expectation of an advance in the price of stock, and the price specified is usually more than the market price of the stock at the time the contract is made. If the stock advances beyond the specified price the holder can buy at the specified price, and sell at the advanced price, thus netting a profit, if the difference is more than enough to pay expenses.

NOTE 2. - The expenses of the buyer of the Call are at the same rates as those of the buyer of a Put. His losses by refusing to call when the stock does not advance are the same as the losses by failing to deliver on a Put.

A SPREAD is a double privilege, giving the holder the privilege of calling for, or delivering the stock as he may wish.

A STRADDLE is the same as a Spread, except that the price named is the current market price instead of at a distance on each side of the market. NOTE 1. The premium paid for a Spread or Straddle is usually at least double that of a Put or Call, and the commission paid the broker is % for each part of the contract, and % for transfer.

NOTE 2. These privileges are often used by speculators as protection from heavy loss in their investments.

208.

A MARGIN is a deposit of cash or its equivalent made with a broker by a person who wishes to speculate in a certain stock, to secure the broker against loss while "carrying" the stock. It is usually 10% of the market value.

NOTE 1.- In case of a decline in the price of the stock the speculator is required to keep good his 10% margin, or the broker will sell him out" to protect himself. The difference between the margin deposited and the balance due the speculator when the stock is sold is the latter's net gain or loss.

209. A SHORT SALE is a sale of stock which the seller does not own, but borrows, or for which he contracts, for delivery, expecting to buy in at a lower rate to cover his short."

NOTE.-Stock is purchased at a margin when it is expected the price will advance; and "short" sales are made when it is expected the price will decline. When a speculator buys a large quantity of stock at a margin or otherwise and holds it for a rise, he is said to be "long" of stock; and when he sells what he does not own (short sale), he is said to be "short" of stock.

210. A BULL is a person who is "long" of stock.

NOTE. As bulls pay interest on the market value of the stocks which they carry, they endeavor to advance the price of their stock so as to be able to sell or "unload" at a profit.

211. A BEAR is a person who is "short" of stock.

NOTE.- Bears pay no interest, but endeavor to depreciate the price of the stock they have sold, so as to buy it in at the depreciated price to "cover their short sales and realize a profit.

212. Dividends declared during the pendency of any of the contracts above described belong with interest to the purchaser, unless it is otherwise agreed.

RULE FOR MARGINAL ACCOUNTS.

PRACTICE.

213. 1. I purchased through a broker 400 shares West End at 27 b. 30, and at the end of the time received the stock, which was then worth only 263. If the broker sold the stock for me on the same day what was my loss?

2. July 16 my broker purchased for me 300 shares N.Y., N.H. & H. R.R. pref. at 159 b. 60. Aug. 27 he demanded the stock and sold it at 1623. What was my net profit? 3. A broker bought on his own account, Aug. 10, 250 shares Old Colony at 179 b. 10. Aug. 15 a 5% dividend was declared. At the expiration of the contract he took the stock and paid the seller the balance due him. How much was it?

4. July 25 I sold 200 shares Atchison, Topeka, & Santa Fé at 113 s. 30, and July 30 delivered the stock which I had purchased on the same day at 113. What was my profit, no brokerage?

5. I purchased, June 16, 225 shares C. B. & Q. at 144& s. 60, and on June 30 a 3% dividend was declared. Aug. 15 I received the stock and paid the balance due the seller. How much was it, no brokerage?

6. July 20 I bought 100 shares B. C. & M. pref. at 1041 b. 60, and sold it on the same day at 106 s. 60. Aug. 31 a settlement was made on both contracts. What was my net profit, allowing % for brokerage?

7. May 25 I purchased a Put on 300 shares Mex. Cen. at 15 for 3 months. July 31 the stock had declined to 12, and on that date I purchased the stock at that price and made the delivery on the Put. What was my net gain, allowing usual brokerages?

8. April 8 I purchased a Call on 300 shares Bell Telephone at 108 for 4 months. Aug. 1 the stock was worth 1101⁄2, and on that date I called the stock and immediately sold it at the advanced rate. What was my net gain, usual brokerage? Aug. 15 I deposited a margin for the purchase of 400 shares Oregon Transcontinental at 30. Sept. 8 the stock

9.

was quoted at 35, and I ordered my broker to sell. How much was due me, allowing usual brokerage? What was my gain?

10. Sept. 28 I deposited a margin for the purchase of tne following stock: 200 shares B. & L. at 169; 200 shares N.Y. C. R.R. at 1081; 400 shares No. Pacific pref. at 59ğ. Oct. 30 I ordered my broker to sell. He did so, receiving 1693 for B. & L., 108 for N.Y. C., and 651 for No. Pacific. Oct. 10 a 5% dividend was declared on the No. Pacific. How much did the broker pay me in settlement? What was my

net gain? 11.

What would have been my net loss from the investment in Problem 10 if No. Pacific had declared no dividend and the stock which I sold was down to 56 at the time of sale?

12. A broker sold "short" for me 400 shares W.U.T. at 76 and 300 Pac. Mail at 43. W.U.T. afterward declined to 73 and Pac. Mail to 41, at which prices I ordered the broker to buy in the stock, to "cover my short." What was my gain, usual brokerage?

13. A broker, having purchased more stock than he could carry, was obliged to "make a turn," i.e., to sell for cash and buy back regular. He therefore sold 300 shares Worcester, Nashua & Rochester at 1371⁄2, 200 shares B. & A. at 205, and 100 shares Eastern pref. at 105. He bought back regular the W. N. & R. at 138, B. & A. at 205, and the Eastern pref. at 1051. What did the "turn" cost the broker?

14. June 22 deposited a margin of $20 per share for the purchase of 200 Jersey Central. Broker bought the stock at 135 June 25 b. 60 and sold same on my order July 23 at 142 s. 30. The stocks were delivered on both trades July 28. What balance ought the broker's statement to show Aug. 1, commissions and interest allowed as usual?

PARTNERSHIP.

214. PARTNERSHIP is the association of two or more persons for the purpose of transacting business as one person.

215. The persons thus associated are termed PARTNERS, and the association is called a FIRM, HOUSE, or COMPANY.

NOTE. The relation of the partners to the business is set forth in a written instrument called the PARTNERSHIP CONTRACT. This paper also specifies the amount and kind of each partner's investment, the extent to which the business shall be carried, the way in which gains and losses are to be shared,

etc.

216. Partners are distinguished as ACTIVE, SILENT, SPECIAL, and NOMINAL.

An ACTIVE PARTNER is one publicly known as a partner, who shares the gains and is liable for the losses.

A SILENT PARTNER is one who is not known as a partner, his name being concealed to avoid liability for debts of the firm. If his relation to the firm be discovered, he is equally liable with the active partner.

A SPECIAL PARTNER is one who invests a certain amount of capital and makes it publicly known that he is to be responsible for debt of the firm only to the extent of his investment.

A NOMINAL PARTNER is one who invests no capital, but allows the use of his naine and credit for the benefit of the business, and thus becomes responsible as a partner.

217. The ASSETS of a firm are its entire property.

218. The LIABILITIES of a firm are the sums owed by the firm to outside parties.