#6 – Understanding all those numbers on a stock exchange.

Back to business!

Ever looked at one of these and wondered what the heck it all means?:

ES3 example

If my understanding is correct, let me try and explain.

Counter Name: This is self explanatory.
Code: This is the trading code of the ETF – usually what you need to type in when you wish to buy / sell.
Blot – Buy Lot – Currently SGX typically enforces buying in Lots of 1000. This means 1000 shares. Next year (2015) this will be reduced to 100.
Last: This is the price that the last trade was done at.
Chg and %: This is change from the previous last trade. In the example above, it has gone up 1 cent which is an increase of 0.299% (3.35 to 3.36).
Vol: Volume of trades completed. This is how many shares of this particular ETF have changed hands in this trading day.
B Vol: Buying volume. This is how many shares a buyer is willing to buy at the listed buy price.
Buy: This is the price that buyers are will to pay.
Sell: This is the price that sellers are willing to sell at.
S Vol: This is how many shares that are up for grabs from the sellers.
High: This is the highest price that was transacted in this trading day.
Low: This is lowest price that was …. you get the point.
Value: This is the dollar value of how much money has been spent on these ETF’s on this day.
IOPV: Indicative optimized portfolio value. This is a calculation of what the fair market value is of the ETF’s taking into consideration the value of the underlying stocks that are held. This is useful in checking if the ETF’s are being bought or sold relative to the value of the underlying assets. If the buy/sell price creeps too far away from this value, you may be buying at a price that’s too expensive, or selling at a price that’s too cheap.
Close: “The closing price for an ETF will reflect more closely the prevailing market conditions. This enhanced feature present a more transparent value of what an ETF is worth, thereby providing investors of ETF with a more up-to–date closing price for making investment decision and portfolio valuation.”

This last one I pulled straight from the SGX’s FAQ.

IOPV

So there you have it, hopefully you now have a better understanding of what each of these terms mean.

The one I was previously most confused on was the B Vol / S Vol, and Buy/Sell prices.

The way it works is like this: Imagine that there are 20 people standing in a room, 10 of them are potential buyers and 10 of them are potential sellers. A buyer might say, “I will buy 17,000 shares at $3.36”. And a seller might say out loud, “I will sell 64,000 shares at $3.37. As you can see, there’s a 1 cent price gap between these two people. At this stage a few things can happen. Maybe the original buyer will say, “Okay, I can’t be bothered waiting for you to lower your price, so I’ll raise my offer to $3.37 and I’ll buy off you whatever I can afford”. Or on the contrary, the seller might say “I am also tired of waiting, so I’ll sell you 17,000 of my shares at $3.36”.

Of course other things can happen. There are 18 other people in that room. One of those might suddenly step up and say, “I will buy all of those 64,000 shares at $3.37”. All of a sudden, another seller might step forward and say “Hmm… looks like there is demand in the market, I will now offer 20,000 shares at $3.38” – this would become the new Sell price. Meanwhile maybe that original guy willing to buy at $3.36 is still there, but another buyer steps in and says, “You know what, I think I’d like to buy 100,000 shares at $3.37” – this would therefore become the new Buy price.

In essence this is basically how the stock market works. A willing seller needs to find a willing buyer and vice versa. The lots do not have to match exactly, (e.g, if 20,000 are on offer from a Seller, a Buyer can buy as little as 1000).

In a rising market (Bull market), the Seller will be able to set their price. In a falling market, the Buyer will be able to set their price.

For example, I’ve put in some low-ball offers in the past and my order went unfilled as no Seller’s were willing to sell at my price (or to put it another way, other Buyer’s were offering higher amounts than I was, so the Sellers were able to get better prices off them first).

On the other hand, if I’m just impatient and the Sell price isn’t far off the IOPV, maybe I’ll just buy at the Seller’s price.

Or, if I am patient and I think the market will drop a little, I’ll set my price to the current Buy price. Hopefully some Seller’s will see my offer and sell to me, filling my order.

The way I have described above is quite relevant for Limit Orders – this is the method of how trading works on SGX. A limit order means that you will not budge on your price at all. The other type of order that can be done on some other exchanges is called a Market Order – a market order will just fill your order at whatever the prevailing prices are. Imagine that you want to buy 100,000 shares, and the current Sell price is $3.37 but the S Vol is only 20,000. First of all, it will snap up those 20,000 shares. After that, it will then proceed to buy the next lot in the queue. Maybe there might be 50,000 shares at $3.38, and another 30,000 shares at $3.39. That is how your order would be filled and you would pay the three different rates for the different lots. A very good method if you’re feeling very impatient!

On my next post, I will run through how to make these actual trades on Citibank’s and DBS Vicker’s online platforms.

#7 – Making your first ETF purchase

Random Post #4 – Theory time!

While I am just some crackpot on the Internet, I’d like to think that all this passive investment stuff isn’t just some pie in the sky scheme served up by my own confirmation bias. After all it’s not a very exiting scheme if all it can do is return the average!

William F Sharpe however won a Nobel prize for his work in this area. Do you want to argue with him? Have you won a Nobel prize? I didn’t think so.

http://web.stanford.edu/~wfsharpe/art/active/active.htm

“Properly measured, the average actively managed dollar must underperform the average passively managed dollar, net of costs.”

I also like this one about Rebalancing your portfolio. This is one of the emotionally toughest things to do for many as it may go against your natural instinct, but if you can manage it properly it will help reduce your risk and will provide you with a positive upside in the long run (as long as markets keep going up over the long run!).

http://efficientfrontier.com/ef/996/rebal.htm

If you managed to understand the theory in both of those essays, congratulations.

As for me, I feel like I got the gist of it and that’s good enough for me.