Steven Libretti Willis Wiggin Simone Thomas Economics of Futures Markets Term Project `

Part 1 December Cocoa Futures

History of Cocoa It is estimated that there are about 3 billion pounds of chocolate consumed annually by Americans and even more by the Europeans with sixteen out of twenty top chocolate consuming nations. Historically, more chocolate is consumed in the winter time and since 2006 prices have practically doubled due to crop shortages as well as an increased consumption rate due to the growing popularity of dark chocolate. With this we find companies such as BT Cocoa, Barry Callebaut, Cargill, and a few others buying cocoa in bulk from a few South American countries, Ghana, Indonesia, and a select few other places around the world. After being purchased by these companies, it is sold to confectioners such as Hershey and Nestle where they package the chocolate. The demand for cocoa derived directly from the demand for chocolate whereas the supply is subject to the cocoa producing nations. Currently the top five cocoa producing nations are the Ivory Coast, Indonesia, Ghana, Nigeria, and Cameroon and these five nations account for about 70% of the annual global cocoa production.

Cocoa Futures

Cocoa is traded on the Intercontinental Exchange (ICE) under the ticker symbol CC. Cocoa is traded using this symbol in dollars per metric ton with a contract size of 10 metric tons. Cocoa has five contract listings or delivery dates with those being: March, May, July, September, and December. It is found that there is no daily price limit on Cocoa though the contract is traded daily on the ICE from 9 am to 7 pm Greenwich Mean Time or 1:30 a.m. - 3:15 p.m. New Page | 1

York Time. Cocoa is settled by direct delivery at a licensed warehouse in the Port of New
York District, Delaware River Port District, Port of Hampton Roads, Port of Albany or Port of Baltimore. The initial margin for Cocoa is $2,660 while the maintenance margin is $1,900. The First Notice Day for CC is the thirteenth business day of the month preceding contract month and the Last Trading Day is one business day prior to the last notice day. Historical Cocoa Futures Pricing Information

Current Cocoa Futures Pricing and Volume

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Technical Analysis As we look at this chart above we can graphically see the price movements that December 11 Cocoa has had this year. We look at the graph and initially we will see that it has an overall downward slope to it though the grade is not very steep at all. We find that the highest prices paid for contracts of December 11 Cocoa were paid in the summer months while the prices began to taper off drastically as we are now coming into the winter months. Early in the year volume for December Cocoa Futures remains low and does not experience and type of increase until August where the volume spikes. As we look at this chart we see that from January up until the middle of June December Cocoa experiences support at the $2,900 price level while facing resistance at around $3,400 though there is a point in late February, early March that the commodity breaks through this resistance and trades up to $3,600. December Cocoa trades at this price range for a very short amount time when it then retreats back down to the previously established level of support. The commodity remains seemingly consistent in the spring months as volume increases, though only slightly from previous months. It is not until the summer months where we see new price actions with December Cocoa. In the summer up until early fall December Cocoa had support at around the $2,800 price range while facing resistance when try to break through the $3,000 price level. Another interesting note the volume compared to the price paid in the summer months and then in the fall and winter months. The volume goes from note even 5,000 to well over 20,000 in a matter of two months. As you examine the chart and move from the summer months of July and August to the fall months where the volume increases drastically you will see how the price begins to steadily drop with no lower support until late September, early October where we begin to see a support level established around $2,600. December Cocoa appears to face some congestion through October until November hits where Cocoa loses all support again. Throughout September and October we can see that there is support for Cocoa in the $2,600 price range while it faces resistance when moving towards $2,800 as it never even breaches this price. It appears that in November Cocoa loses its support at around $2,600 and continues to fall off through November and December as the demand for this product begins to increase. December 2011 Cocoa is now trading at $2,021 in the month of December and it is unclear where support and resistance levels will be established. By looking at this chart we might be able to come to a conclusion that there will be support around the $2,000 price range while it will face resistance at about $2,200. This remains unclear as we are only in the second week of December and there is little information available to us at this time. You can look at the lower part of the graph and see the way the volume dramatically changes as the seasons change. December Cocoa sees what appear to be abnormal spikes in volume in August which is not nearly matched until the middle of November. It appears that the volume for December Cocoa settles as August draws to a close and we continue through September and October. Volume begins to increase again towards the end of November as we lead our way into the holiday months where chocolate consumption is at its highest point. The open interest for December Cocoa remains at 51 today while we can see that over the course of the year it has remained relatively stable at this point. Open interest however plummets right as November hits and remains

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Fundamental Analysis We can look at this graph of prices and volume for December Cocoa futures and generate some insight as to why it is depicted as such. Starting with the volume we can look at this and see that volume remains relatively stagnant from January through July, though it does increase from seemingly 0 to what appears to be about 3,000. It is not until we start moving towards the holiday months which bring the cold weather and the desire for chocolate products, specifically cocoa. In august there is an inexplicable spike in volume, though there appears to be some support at this volume until September and October pass through and the volume levels around 40,000 in these months and continues to hold true to this level with slight increases in the month of November. As the months pass we can how the demand for December Cocoa continues to change. As we are moving towards the holidays, demand for chocolate begins to increase as we can see at a startling rate with the volume increasing as it has. As the demand begins to increase through the holidays, the price begins to fall, particularly at the start of September, where it does not gain some positive momentum again until the beginning of October. The increasing demand coupled with increasing supplies drives prices for the commodity and ultimately for consumers downward. This supply and demand action takes place between September and October and also November and December.

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Part 2 Patriot Coal Corporation (PCX) Stock Report

Patriot Coal Company is a market leader of metallurgic and thermal coal in the eastern United States. The Patriot Coal Company was founded in 2007 after being spun off from the Peabody Energy Company. As defined by the Securities and Exchange Commission, a spinoff is defined as," when a parent company distributes shares of a subsidiary to the parent company's shareholders (SEC). This spin off was completed because Peabody Energy, being the leading private sector coal company in the United States, had to focus on its core business; and felt Patriot Coal would do well as being its own entity. Patriot Coal Corporation currently owns and operates 14 different mining facilities throughout the United States of America. In Appalachia, Patriot Coal facilitates numerous mines where their operations sold 24.3 million tons of metallurgical and steam coal (Patriot Coal). In the Illinois Basin, Patriot Coal mines produced 6.6 million tons of thermal coal for electricity generating plants across the Mid-West (Patriot Coal). Most of Patriot Coals business is dealt within the United States of America; however 20% of their sales come from international steel producers. They ship coal to electricity generators, industrial users, steel mills, and independent coke producers (Annual Report). Found on Patriot Coals website, their companys mission is to, make safety their highest priority and the cornerstone of the relationship with our employee, promote a high-performing organization by hiring and retaining the most qualified people and maximizing their opportunities through personal growth and development, engineer, build and manage our operations to enhance productivity and ensure a competitive cost structure, be a steward of the environment and a good neighbor in the communities where we operate, provide creative solutions for our customers through utilization of our diverse sourcing capabilities and innovative contracting techniques, honor our commitments and conduct our business with trust, respect and integrity toward customers, suppliers, employees and regulatory agencies, and enhance shareholder value through sound decision-making and growth from development of existing resources and strategic acquisitions. Patriot Coal Corporation is a leading producer and marketer of coal in the eastern United States, with 14 current mining complexes in Appalachia and the Illinois Basin. The company ships to domestic and international electric utilities, industrial users and metallurgical coal customers, and controls approximately 1.9 billion tons of proven and probable coal reserves. Since the time of Patriot Coals initial price offering (IPO), the stock price began at 17.5 dollars a share, and has for the most part been pretty stable. Currently, during the period of Patriot Coals 2011 fiscal year, the stock price has fallen significantly. Early January, PCX stock was trading at 23.19 dollars a share, and over the course of the year fell to what is now 9.89 dollars per share. Reaching a high of 28.44 dollars, PCX began to decline at a slow rate; however, in early August, there was a downward flag movement that forced PCX stock down to 12.16 dollars per share (approximately a $13 loss). After the stock rallied from this flag, another sharp decline happened in early September, declining from $14.33 to $8.46 per share to date, the PCX stock Page | 5

has rallied only briefly, touching $13.36 per share in early November.

Technically, PCX has had an unfortunate fiscal year so far. However, when a stock is compared fundamentally and technically, the results may vary. Patriot Coal Company has had very tough strategic decisions to make based on sales, stocks, and operations due to the company being only four years old. This fundamental analysis will look at the stock valuation, business performance, management behavior, and the credit risk. Due to increased amounts of regulatory pressure where employees spend work time meeting regulations and procedure; the result ends in lower production and a higher cost per ton (Annual Report, 7). Below is a chart displaying Patriot Coals revenues and expenditures

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As the figure shows, Patriot Coal lost a net total of sales of 1,972 tons of coal from 2009 to 2010. Due to this lack of sales, the average price for a ton of coal raised 7.5% and this sharp increase in price lead to only a .5% increase in revenue. As Patriot Coals stock is valuated, certain ratios are shown below to help further understand the financial standing of this corporation. Patriot Coals current Earnings per Share (EPS) ratio, given by Yahoo Finance, is currently at -.77. Patriot Coals profitability per share is at -77 cents per dollar. Although the EPS is a relatively small negative number, it still indicates Patriot Coal Company is currently Page | 7

losing money as a business; however they are not too far under to be disinterested in. Patriot Coal Companys market capitalization is currently at $835.66 million, meaning the price of each share multiplied by the number of outstanding shares reaches well over 800 million, showing investors and the public that Patriot Coal is a large corporation. Using the EPS, the Price to Earnings ratio can be used to see relationship between the price paid for a share and the profits the company builds per share. Using the ration P/E = Market Price per Share / Earnings per Share. (P/E = 9.18/-.77). The current P/E ratio for PCX is equal to -11.22, which is very unattractive. The managers and the president Richard Whiting have realized losses and declining profits and have focused their energy on emerging markets. Richard said himself, The slow recovery of 2010 was an ideal proving ground for testing the strength and potential of our initiatives. Emerging challenges that face Whiting and his coal company are a growing demand for energy and coal, increased regulatory oversight, and issues with the geology of their work sites. To strategically combat these issues, Patriot Coal is working on increasing their metallurgic coal production by introducing two new mine locations. Along with domestic sales, Patriot Coal has outreached to countries in Europe, South America, and Asia to meet their demand of coal for energy needs. Management sees safety as a high priority; thus they introduce safety plans and procedures that effectively have knocked companywide injuries down to only five in 2010, and they are working on obtaining zero a month. Meeting the market myopia, as demand increases, Patriot Coal is looking to introduce seven new coal mines (Annual Report, 4). Unfortunately for Patriot Coal and stakeholders in the corporation, there are a few credit risks involved in PCXs future. As described in page 12 of the annual report, the risks involved with Patriot Coal include price volatility, unforeseen geologic conditions, equipment problems, changes in economic conditions, changes in coal mining laws, availability of alternative energy sources, increases in mining costs, new environmental laws and regulations. Credit risk for Patriot Coal mainly comes from their spin off company Peabody and their marketing affiliates. Concentration of credit risk substantially resides with large utility customers, metallurgical customers and Peabody. In 2010, approximately18% of our revenues was from a marketing affiliate of Peabody (Annual Report, 30). However, it is Patriot Coals policy to independently evaluate each customers credit risk before conducting business. Although Patriot Coals current P/E and EPS are negative, through fundamentally analyzing their projections, goals, and steps towards further profit; it is safe to say that Patriot Coal is on a road to success and plentiful business opportunities.

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Part 3 Stock Track Simulation Trading Game

Willis` Stock Trak Experience As I began to play the Stock Trak game, I felt nervous, unprepared, and excited to begin my journey through trading fake stock. On the first day, I decided to try investing in futures; in this case, cocoa, wheat, and sweet crude oil.
10/5/2011 12:44 PM Market - Buy CL/X1 100 78.51 -10.00 0.00 USD 1.00 USD 1.00 USD 1.00

OIL CRUDE (SWEET) 11/11

/ / /

Futures

10/4/2011 1:54 PM

Market - Buy

ZW/Z1

WHEAT 12/11

6.07

-10.00

0.00

Futures

10/4/2011 1:48 PM

Market - Buy

CC/Z1

COCOA 12/11

2,605.00

-10.00

0.00

Futures

I did not want to spend too much money at first, because I was unaware of how much a futures price would fluctuate over the course of a few days. I decided to purchase December wheat and cocoa because I knew the price would be more stable at the time. I purchased the oil at November because I thought the prices would spike higher than the price I bought at right before the contract was due. The same day I decided to purchase my first stocks. I sat on my computer, logged on to cnbc.com, finance.google.com, and finance.yahoo.com, as well as watching the news on CNBC. On the websites that day, there is a section for industry leaders, and I saw that the coal industry had been moving up 10% on that day, so I invested in PCX and James River Coal Company JRCC.
Trade Date Transaction Type Symbol Company Name QTY Price Comm.* Amount* Cur Security

10/5/2011 1:11 PM 10/5/2011 1:08 PM 10/5/2011 1:02 PM

Market Buy Market Buy Market Buy

JRCC

James River Coal Company

400

7.30

-10.00

-2,920.00

USD 1.00 USD 1.00

/ /

Equities

PCX

Patriot Coal Corporation

350

9.30

-10.00

-3,255.00

Equities

DELL

Dell Inc.

450

15.20

-10.00

-6,840.00

USD/1.00

Equities

Also, my roommate being in a finance class himself was playing a wall street journal stock game as

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well; and he told me to invest in Dell. Later on in the month, I began to trade more fearlessly and tried to invest bigger packets of money at a time to increase my market return %. Investing in companies like CIC Energy, China Airlines, and Enerplus Corporation, all gave me large returns on my investment for a few days/weeks. At the time of Steve Jobs death and the release of the Apple 4S, I invested 78,514 dollars on Apple, where later that stock grew dramatically. My biggest return on investment was the sweet crude oil. I purchased it at 78.51, and sold it at 85.45, for 100 contracts thus giving me a ROI of $694,000. My worst investment was a risk I took on First Solar Company; I spent $115,740 on 2,000 shares hoping the solar industry was on a rise. Instead, it fell dramatically and I lost over $30,000. FUTURES: December Wheat: 3 Contracts: Profit: (5,287.5) December Cocoa: 3 Contracts: Profit: (20,910) December Coffee: 4 Contracts: Profit: (11,925) December Live Cattle: 600 Contracts: Profit (57,600) November Sweet Crude Oil: 100 Contracts: Profit 694,000 Total Contracts: 710 Total Profit: $598,277.5 STOCKS This is a chart of my total profits/losses. Total Shares: 21,500 Total Profit: (30,107)

Symbol Company Name AAPL DELL ELC ERF FSLR HPQ JRCC Apple Inc. Dell Inc. CIC ENERGY CORP Enerplus Corporation First Solar, Inc. Hewlett Packard Co. James River Coal Company

QTY 200 450 1,000 200 2,000 200 5,400

Profit/Loss 210.00 265.50 -678.20 256.00 -24,400.00 652.00 -8,328.00 Page | 10

LVLT PCX PRU S SSYS ZNH

Level 3 Communications, Inc. Patriot Coal Corporation Prudential Financial Inc. Sprint Nextel Corporation Stratasys Inc. China Southern Airlines Company Limited

800 5,350 200 4,500 1,000 200

-4,048.00 806.50 546.00 -3,600.00 7,820.00 386.00

I thought I did very well watching trends and following patterns such as flags, triangles, and gaps; however, what I did learn is that to be a successful trader, you must watch your stocks move multiple times a day and be up to date with all business news at all times. There were periods were I did not check my Stock Trak for days or a week and by then I had lost so much money due to fluctuations and dips in the stock. In all, I rate this experience as incredibly helpful and highly addicting

Simones Stock Trak Experience Simones initial strategy was very conservative: she stayed mostly in cash and only took out a miniscule stock position in Google, which eventually yielded a $93.11 profit with an 18% ROI (+$73.11, 14% ROI after commission). Later, she took on a trading strategy that could be classified as the rogue trader because it mimics the strategy used by the rogue traders who lost billions of dollars at firms such as UBS and Socit Gnrale. While this is obviously not the best strategy to take, it is only in retrospect that she realized her errors. As with all trades, Simones started with a solid foundation. She initially took 3 larger positions, all in commodities. She took long positions in October Gold and January Oil Crude (Sweet) while shorting the December Euro. She was in essence betting on the Euro contagion news that was coming out every day to bring the value of the Euro down and hence increasing the value of other commodities. She decided to cut this position when negative news about Italy came out yet the Euro still rose against the dollar. At this point she covered the Euro position at a loss of $.35 and sold the January Oil Crude at a $71.00 profit with a 3% ROI (+$51.00, 2% ROI after commission). She also sold the October Gold contracts at a profit of $111.20 with a 3% ROI (+$101.20, 3% ROI after commission). This is when things started to get a little out of hand. Simone figured since this was not real money, she could have a little fun and put on some extra risk, just as the rogue traders she was "imitating" also treated it as a game because they were risking other peoples money. At first this worked out for her. She took a massive long position in December Gold futures, which started off well she was up over 10% in just a few days. Page | 11

Then she got greedy. When gold dipped a bit, she decided to double up her position even though it would slightly raise her cost basis. She went against the technical signals hoping to ride the momentum, which proved to be an unsuccessful move. Gold dipped more. She doubled down again by putting February contracts on margin. This vicious cycle continued and before she knew it she had $1,039,000 on margin, which equated to over $19,000,000 exposure when putting up 5% of the total contract value. Before commissions, Simone took a loss of $86,669.50 (-$86,619.50 after commissions) from buying December Gold and a $104,997.00 loss from buying February Gold (-$104,977.00 after commissions). Each yielded a -100% ROI. These losses could have been significantly lower had she hedged her positions. Looking back, she could see many mistakes that she made. She was betting on weaker currencies due to Euro instability and US sovereign debt. The combination of both, in theory, should raise the price of gold especially if investors are looking for safety. This position was not hedged and looking back, she would have considered buying puts for a strike price 10% under what the future contracts were going for. Simone also took too much risk and did not properly hedge her positions. It is quite obvious that her initial small stock position was significantly less risky than the large commodity positions she took later on in the game. This is mainly due to the implied leverage of commodity futures. Commissions had a small impact on profits because the positions were so large. Stevens Stock Trak Experience Throughout the semester I made a few stock acquisitions including: Netflix, Dow Chemical, Fuel Tech, Sprint, and Patriot Coal in efforts to generate a return on the initial investment that I had made. As I began to think about which companies I would like to trade I decided that it would be smart to follow these stocks for a few days and see what kind of pricing action is taking place. I would notice that perhaps after news is reported the stock might fall in price which is generally a better time to purchase as you are always attempting to make a profit. For example, after Netflix reported disappointing earnings and the stock dropped well over fifty points in a few days, I decided to make an investment on Netflix and bought it at one of the lowest prices that the stock has ever hit. This decision proved to work well as I initially purchased 1,000 shares at $77.11 per share and then later in the day I purchased another 4,000 shares at $80.75. On my first transaction I placed a Limit Buy order at $77.11 which was executed on the opening. The stock showed positive price movements so I decided at around 2 PM to place a market order for 4,000 additional shares which were then purchased at the previously mentioned $80.75 position. In total I own 5,000 shares of Netflix at an average price of $80 per share. The stock price had gone up to over $90 at a point at which in retrospect I have should have sold at because the company is now trading below the value I paid for my shares. Today my shares are valued at $69.74 (todays opening price) which ends up proving to be a net loss on this transaction of $51,410. Had I been more responsible with my trading and actually sold at the higher price I would have earned a profit of similar proportion. One thing that my father has always told me about trading is that you can never be emotional with your stocks, meaning that just because the price is skyrocketing or plummeting does not mean that you should go ahead and take action with them. The acquisition of stock, especially of a company such as Netflix should be looked at as investment, something that you will hold onto for a number of years which should hopefully make you more money in the long run as the company continues to succeed. Page | 12

My acquisition of Netflix, to be honest, is one of the few transactions that I made which was actually thought out and had decent reasoning behind it though I did invest carefully in a few separate cases as well. In addition to Netflix, I decided to invest in both Sprint and Patriot Coal as they were nearing they were both showing positive pricing movements during the week that I made the decision to purchase. I purchased 1,000 shares of Sprint at $2.22 and 4,000 shares of Patriot Coal at $9.24. These companies are now trading at $2.44 and $9.54 (todays opening) respectively. Again of this short course of time, there is not much opportunity to grow. These two companies did experience positive pricing movements; however, there was not enough support at the higher prices that they had moved to, and therefore fell back to their respective support levels which they are trading around today. In the short course I became profitable with my acquisition of Sprint, making 22 cents per share to give an overall profit of $220. Though it is not much, it is still a decent profit to turn around in such a short period of time. My position in Patriot Coal also proved to be profitable as the company opened today 30 cents higher than when I purchased it on October 13. In two short months I have been able to accrue a profit of $2,160 which is a substantial profit for such a short period of time. I was able to gain a larger profit with Patriot Coal because I took a much larger position with this company purchasing 4,000 shares compared to 1,000 shares of Sprint. I do not exactly have reasoning behind this, more so that I just picked a number of shares without putting too much thought into the quantity; rather I placed more of an emphasis of securing position at a predetermined price. For my purchase of Sprint, I placed a market order for the 1,000 shares because the company has been floating around its 52 week low. With PCX, I decided to place a limit order at $9.25 as I wanted to purchase stock at the lowest price in efforts to remain profitable in the long run because the stock was fluctuating up to over $9.50 on the day I was purchasing if I do recall correctly. This position provided to instrumental in providing a positive return on my investment at the end of this Stock Market Game. All the profits that I had been able to generate were commission free transactions and profits may not have been profits had there been a commission rate to make a trade. For my transaction involving Netflix, the total purchase price was $77,110 for the first purchase and then $323,000 for the second. A standard 10% commission on these transactions proves to be $7,711 and $32,300 respectively. When I go back and compare these new numbers with the previous loss that I stated, we can see that I did lose only lose on my principle, I also would normally have to pay these commission rates as well. Overall my position on Netflix, including commission would be a loss of $90,820. Similarly we can find that on my position with Sprint there would have been a commission of $220 to make the trade which happens to coincidentally be the same amount that I ended up making on the purchase and brings my net on this position to $0. Again with Patriot Coal we can see that the total sale cost $39,960 and with a 10% commission rate applied that would be an additional $3,996 that I would have to pay if I were trading in the real world. After adding this negative amount to the profits of $2,160, we can see that again I end up losing $1,836 on the position that I took. From this we can gather that it is very difficult to make any sort of money in a two month window in the stock market. The purchasing of stocks is an investment that one must be committed to holding onto for an extended period of time, whether it be one year, five years, or any number of years the holder desires. You are not going to turn around a profit in a month or two and you may not even see a profit in one year. If you

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choose your investments wisely you hope to see continuing growth with your portfolio with the longer you stay with your positions. As you will look through my history of transactions, you will see that there are acquisitions of much smaller, cheaper companies such as Fuel Tech, American Tower Corporation, Century Link, Windstream Corporation, AmerisourceBergen Corporation, and Rydex S&P Equal Weight Technology. These transactions were made with a little help from an analyst that I interned with over this past summer. I spoke with him and we discussed ways to generate large gains over the short period of time that this Stock Market game encompassed. Granted he is far better educated in this topic we worked a little bit on this and he helped to provide a comprehensive strategy to follow in efforts to generate the most profit; however, at the end of the day it proved to be a bit confusing for me at this point and I had decided to do away with his plan and see what I can do on my own. For your interest, I will include the strategy that he laid out as I am sure you would be interested in reviewing his methods.

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Position Size Model $ 100,000 Total trading capital 1.00% Money management stop 10 Max number of positions 10,000 1,000 94,636 7,400 5,364 Max initial position size Max initial risk per position Initial capital invested Initial capital at risk initial cash balance

$ $ $ $ $

Sector Security Consumer Staple WER Consumer Discretionary RTY Healthcare LKJ Financial ERK Energy ADB Information Tech CGB Telecom Svc BNE Industrial ERK Materials RYT Utilities SCLX

Entry $

33.52 51.89 17.80 18.02 72.22 39.72 40.00 97.57 50.10 10.64

Stop $

31.50 47.42 16.60 16.47 65.22 37.53 37.53 95.00 44.50 8.77

Risk Potential 6.03% $ 8.61% 6.74% 8.60% 9.69% 5.51% 6.18% 2.63% 11.18% 17.58%

Shares 602.63 861.44 674.16 860.16 969.26 551.36 617.50 263.40 1,000.00 1,000.00 298 193 562 555 138 252 250 102 179 535

$Investment $ 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 8,946.43 5,689.84

POSITION SIZING MODEL $ 150,000 Total trading capital 1.00% Money management stop 15 Max number of positions 10,000 1,500 147,910 11,278 2,090 Max initial position size Max initial risk per position Initial capital invested Initial capital at risk initial cash balance

$ $ $ $ $

SECURITY ENTRY WER $ RTY LKJ ERK BTF ADB CGB ABC IBT BNE ABD ERK ERK RYT SCLX POSITION SIZING MODEL
$

33.52 51.89 17.80 18.02 16.65 72.22 39.72 76.67 22.15 40.00 25.00 97.57 97.57 50.10 10.64

STOP $

31.50 47.42 16.60 16.47 16.47 65.22 37.53 70.00 21.00 37.53 21.00 95.00 95.00 44.50 8.77

RISK POTENTIAL 6.03% $ 8.61% 6.74% 8.60% 1.08% 9.69% 5.51% 8.70% 5.19% 6.18% 16.00% 2.63% 2.63% 11.18% 17.58%

SHARES 602.63 861.44 674.16 860.16 108.11 969.26 551.36 869.96 519.19 617.50 1,500.00 263.40 263.40 1,117.76 1,500.00 298 193 562 555 601 138 252 130 451 250 375 102 102 200 802

$ INVESTMENT $ 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 9,375.00 10,000.00 10,000.00 10,000.00 8,534.76

250,000 Total trading capital 0.50% Money management stop 20 Max number of positions 12,500 1,250 218,623 18,180 31,377 Max initial position size Max initial risk per position Initial capital invested Initial capital at risk initial cash balance

$ $ $ $ $

SECURITY WER RTY KTS LKJ ERK BTF ADB ADB CGB ABC IBT PTS BNE ABD ERK CYA RYT RYT SCLX PNT

ENTRY $

33.52 51.89 20.00 17.80 18.02 16.65 72.22 72.22 39.72 76.67 22.15 84.50 40.00 25.00 97.57 8.43 50.10 50.10 10.64 11.00

STOP $

29.00 47.42 17.60 16.60 16.47 16.47 65.22 65.22 37.53 70.00 21.00 80.00 37.53 22.00 95.00 7.80 44.50 44.50 7.00 10.00

RISK POTENTIAL 13.48% $ 8.61% 12.00% 6.74% 8.60% 1.08% 9.69% 9.69% 5.51% 8.70% 5.19% 5.33% 6.18% 12.00% 2.63% 7.47% 11.18% 11.18% 34.21% 9.09%

SHARES 1,250.00 1,076.80 1,250.00 842.70 1,075.19 135.14 1,211.58 1,211.58 689.20 1,087.45 648.98 665.68 771.88 1,250.00 329.25 934.16 1,250.00 1,250.00 1,250.00 1,136.36 277 241 521 702 694 751 173 173 315 163 564 148 313 417 128 1,483 223 223 343 1,136

$ INVESTMENT $ 9,269.91 12,500.00 10,416.67 12,500.00 12,500.00 12,500.00 12,500.00 12,500.00 12,500.00 12,500.00 12,500.00 12,500.00 12,500.00 10,416.67 12,500.00 12,500.00 11,183.04 11,183.04 3,653.85 12,500.00

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Conclusion
Throughout the semester we have learned a great deal from this course, but particularly the stock market game that we played. Using real-life scenarios through Stock Trak, we have learned the fragility of risk and price influences. Despite not using our own money, we believed that the risk that we faced is real and the possibility of losing a great deal of money is possible as well. The stock market game brings awareness to what it takes to be a successful trader and have a portfolio which remains positive. By understanding losses, we believe we have learned how to take into consideration the many factors behind a stock or contract. Not only should one look at a current price, but he/she should research the business, its ideals, its financial and managerial history, and the status of their competitors and alternatives. At first, we would focus on if a stock has been going up or down; but now we understand more than a price fluctuates in patterns that can be predicted and taken advantage of. By being more in tune with the importance of both technical and fundamental analysis, we have become better at the game of trading.

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Sources
https://www.theice.com/productguide/ProductDetails.shtml?specId=7 http://www.wikinvest.com/wiki/Cocoa_Futures http://www.wikinvest.com/commodity/Cocoa
http://www.patriotcoal.com/annualreport2010/2010-Patriot-AR-Full.pdf http://library.corporate-ir.net/library/21/216/216060/items/286207/PCX040308b.pdf http://www.sec.gov/cgi-bin/viewer?action=view&cik=1376812&accession_number=000144530511-003184&xbrl_type=v# http://www.sec.gov/answers/spinoffs.htm

Images Used (In Order): http://www.wikinvest.com/images/thumb/6/67/ActualCocoaPrices.jpg/400pxActualCocoaPrices.jpg http://www.wikinvest.com/images/thumb/3/36/WorldCocoaProduction.jpg/400pxWorldCocoaProduction.jpg http://classic.tradingcharts.com/marketquotes/quickquote.php?sel=Cocoa http://www.barchart.com/chart.php?sym=CCZ11&t=BAR&size=M&v=2&g=1&p=D&d=X&qb =1&style=technical

http://www.patriotcoal.com/annualreport2010/2010-Patriot-AR-Full.pdf

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