Buying corp stock? Options

[Brahm]

From a cynical metagame perspective Brokerage X is a prepackaged solution for the GM to handle players wanting their PCs to benefit on stock deals using inside information. The GM doesn't need to worry about fleshing out details for brokers, money laundering, fake SINs and such. In short it helps keep the game from sliding closer to Shadowaccounting than Shadowrun.

But if you like dealing with the details of money laundering or the GM would like to exploit the run potential of exploring that aspect of the criminal world, and it is there if you want it, then Brokerage X isn't for you.

[SL James]

Good point. I'm one of the latter. I loved doing research on money laundering. It is cool shit to read about and play out in SR. But if one doesn't, then BX or something like it (i.e., something less expensive and less über) is useful but kind of, well, simple.

[tisoz]

As someone mentioned, you only need to own a single share to get the corporate information and be able to attend stockholder meetings. To be a corporate officer or to be on the board of directors does not ordinarily require any form of stock ownership. (It may if the bylaws make it a requirement.) The board of directors is elected by the shareholders. So when Dunkie was handing out board seats and stock, it was the stock that allowed them to be voted to the board.

Someone else also pointed out that the price of a share of stock is not the indicator of the companies value or market capitalization. Berkshire Hathaway is tens of thousands of dollars a sheare because it has seldom if ever split its stock. In a simple stock split the company announces every share will be counted as 2 shares and the price usually drops by 50%, keeping the market capitalization about what it was. Why would a company do this? To keep the stock price trading in a certain monetary range, maybe one the corp thinks is affordable or that the industry they are in trades at. (If their company is worth 10 times their competitors and the stock is trading at 1000/share, their competitor is probably trading at 100/share. They are seeking the same market dollars, but it looks like their stock is out of the price range for some investors. Throw in that stock is usually traded in blocks, like a hundred or 500 shares at a time, and those concerns multiply. So the high price stock does a 10 for 1 split and now costs around 100/share.)

Something no one mentioned concerning investing in a corporation when they anticipate a price move based on their actions is investing in options instead of the stock. Options would allow for a greater potential price increase and would provide better leverage on the investment by costing a fraction of the cost of buying or shorting the stock. (And I am going to assume any traded megacorp has an active options market.) As a GM, I would set the price of the option at 10% the price of the stock. So the PC could buy 10 times as many options as shares. If the price of the stock moves 1%, the price of the option is going to move about 10%. The magnified return is another reason investing in options for these anticipated movements is preferable.

Why does it work that way? Say a stock is selling at 100 and the option to buy that stock in the next month for 91 is 10, the 1 difference is the value of the time and risk. The next day the stock price moves to 101, the value of the option shoud be about 11 (it may have lost a little because it is a day later and thus a day closer to expiring), the 10 difference in price plus the 1 for time and risk. If the GM wants to curb the return a bit he can have the 'time and risk' portion of the option price be a larger percentage of the option price. Instead of the 1 in the example it could be 5, representing the volatility of the stock, or how easily its price fluctuates. Remember too, the option does not have to be exercised, it can be sold for its current market value.

[Sorry to go on about options, but if you are holding a position anticipating short term movement, options are the way to go. If the stock I made a bundle off of had an option market, I would be a richer man.]