Exercise 1 - Stock-Trak Simulation

BA 443

Exercise 1 - Stock-Trak Simulation

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Your account number is: H720 ___

Simulation Overview

Stock-Trak, Inc. is a nationwide portfolio simulation broker that allows individuals to trade various securities in a hypothetical portfolio. The simulation is reasonably realistic.

The objective of this simulation is to put into ‘practice’ the portfolio strategies, analyses, and evaluations that we discuss in class.

Each group (of two students) will be provided with a $1,000,000 starting cash balance (with margin you have $2,000,000 in purchasing power) and a maximum of 200 trades with which to make the required trades for the course. Since the course-related exercises will not require the use of all those trades (see reverse side), students are encouraged to make other trades that allow you to explore strategies and ideas. The trading period to complete the required trades runs from 01/12/2009 to 03/11/2009. Specific exercise deadlines will be provided in class.

Your grade is primarily based on the completion of the required exercises. However, depending on the performance of your account relative to your classmates you have the opportunity to earn extra-credit points. The top two performing groups will be awarded 1 extra-credit point. Additionally, each group that performs better than I do (I will be running a portfolio as well) will be awarded 1 extra-credit point. Additionally, there will be a prize and (a limited amount of) humiliation for the best and worst performing groups at the end of the term.

Getting Started

1. Register for Stock-Trak.

Go to the broker website ( and carefully read the trading rules. A link to these rules can be found under “College Students”. I would suggest that you print and keep a copy of these rules for reference. Open an account by clicking on the “Open Account” link with the account number that I provide to you in class. Please remember to use your $7 off coupon that you get if you purchased a new copy of the course text (Reilly/Brown) when you register. The account will cost you $20.95 after the discount.

2. Construct a portfolio

As a first exercise, I would like you to construct a portfolio of 20 stocks. You should spend around $400,000. You should purchase at least $5,000 worth of shares of each stock in your portfolio. I would like the portfolio to have at least one stock from every sector represented on the S&P 500 index. (There are 10 sectors.) The stocks do not have to be on the S&P 500. The link below provides you with a list of sectors represented by the index and information about what stocks are in each sector. You are free to choose any stock(s) within a sector and you are free to weight your portfolio in any way you choose, i.e., you can have a weighting that is representative of the index, or if you believe that a certain sector or sectors may outperform over the next two months, you can weight your portfolio towards that sector or sectors. You do not have to choose stocks that are on the S&P 500 index.

S&P Index sectors and weightings:

You should turn in a spreadsheet electronically with the following information by Wednesday, January 14th, 4 p.m.:

1. Columns with: Stock name, ticker, sector, date purchased, price per share, number of shares purchased, value of shares purchased, portfolio weight for each stock.
2. Portfolio weight for each sector.
3. S&P Index weight for each sector.

Toward the end of the term we will determine how well your portfolio performed compared to the S&P 500 index benchmark. We will determine whether the performance was due to stock selection or due to sector weightings.

I expect that the required course exercises will require at most 100 trades and $600,000 in cash. If you choose to trade derivative securities (options, futures, etc.) please be aware of the margin requirements. I don’t want you to lose so much that you would not be able to complete the course requirements. We will not be discussing derivative trading strategies in this class.