Rules

1. Initial Cash Balance:
The initial cash balance is $100,000.

2. How To Trade:
Before making any trades, you must have your team number, password, and the ticker symbols of the securities you wish to trade.
California Stock Market Simulation home page (http://www.californiasms.com)
Visit the home page to submit trades, review your team's activity, research stocks, obtain quotes, find ticker symbols, and review your team's ranking. This is the best way to trade because it is fast, accurate, and convenient.
Trading Stocks: There are four basic ways to trade stocks: buy, sell, short sell, and short cover. When buying a stock, you are taking a "long position" with the hope that the price per share will increase. When you sell a stock, you close that long position. Selling short is selling a stock that you don't own (you actually borrow the stock from the broker) with the hope that you can later buy the stock back at a lower price. When you buy the stock to pay back what you borrowed, it is called "covering" your short position. To buy or short sell a stock, specify how many shares you want, rather than how much money you wish to spend. You may not be long and short in the same stock at the same time.
Day trading such as the buying and selling of the same stock on the same day is not allowed.

Trading Funds: You may buy or sell mutual funds with the SMS. Mutual funds are traded in dollar amounts not by number of shares. Mutual funds must be traded in lots of $500. Like stocks, in order to trade mutual funds you must have the ticker symbol. All mutual fund ticker symbols are five letters long ending in "X".

3. Trading Times and Prices Received:

Stocks: Trades made via the web page will fill at real time prices if placed while the market is open (generally 9:30 am to 4:00 pm ET). Trades placed after the market has closed will receive the next day's open price.

4. Splits and Dividends:
All stock splits and all dividend payments over $0.10 will be credited to your portfolio. Splits that have been credited to your portfolio have the appearance of a buy or short sell, but the price per share is $0.00. Dividends will appear in your portfolio with a "DIV" attached to the ticker symbol. In order to receive a split and/or dividend, a team must have a current open position in the stock by the Ex-Date (The ex-date is usually two business days before the record date. It is indicated in newspaper listings with an x.). Splits and dividends will be posted in accounts by the "Ex-Date."

5. Securities that can be traded:
Stocks: You may buy, sell, sell short, and cover a short almost all NYSE and NASDAQ-AMEX stocks (common and preferred) that are trading at $5.00 or more. IPOs are usually available the afternoon that the new stock starts trading on the exchanges. Stock trades may be in any whole number of shares greater than 25 (i.e., 25 share minimum but you can trade 26 shares or more).
Mutual Funds: All publicly traded mutual funds may be traded.

6. Volume and Purchase Restrictions:

Throughout the simulation, teams may invest no more than $25,000 in any one stock.
Teams may not buy or short sell stocks trading for under $5.00 per share (no penny stocks).
The maximum number of shares a team may trade is limited to half the actual volume on the stock that day.
Mutual funds must be traded in lots of $500.
You may not hold a short and a long position in the same stock at the same time.

7. Ticker Symbols:
You need to know the ticker symbol for the security before you can trade it. Please note that most local newspapers show only the abbreviation of the company name, not the ticker symbol. The Wall Street Journal and the web page are two really good sources to help you find the ticker symbols you need.

8. Commission:
A broker's commission is applied to most transactions. The commission for stock trades is a flat fee of $25.00 on each transaction regardless of the number of shares. If you sell one stock and buy another you will be charged two commission fees. The commission charged for all mutual funds is 1% of the purchase price. A commission is not charged when selling mutual funds.

9. Margin Requirements:
The margin requirement for the simulation is 50%. Initially, this means that since you are starting with $100,000, you may borrow another $100,000, making your total buying power $200,000. You may buy and short sell stocks on margin.

10. Interest Earned:
Interest will be earned on all available cash balances and credited at the close of each day. During the simulation, cash balances will earn 3% interest, compounded daily.

11. Interest Charged:
Interest will be charged on all loan balances and will be debited at the close of each day. During the simulation, loan balances will charge 8% interest.

12. Portfolio Statements:
Team activity may be reviewed at http://www.californiasms.com. Team activity and team rankings are updated every business day on the web page.

13. Number of Transactions:
Each team is limited to 100 transactions during the trading period. Each buy, sell, short sell or short cover counts as a transaction. For example, if you buy a stock and sell another stock you will be charged with 2 transactions.

14. Our 3-4-25 rule is stated as follows:
Teams must have at least 3 investments in their portfolio by the end of the 4th week of the simulation, and must continue to hold at least three for the remainder of the simulation. Teams may not invest more than $25,000 in any one stock during the simulation.

15. End of the Simulation:
You do not need to convert all of your investments to cash on the last day of the simulation. Your portfolio will be valued at the closing prices for that day. The California Stock Market Simulation will announce the official winners of the simulation, usually within two weeks after the last day of trading.

16. Disputes and Errors:

If you and your teacher believes an error has been made in your portfolio, your teacher may call 1-866-SMS-DESK, toll-free, to discuss the problem. Please review your statements and report any problems right away.
Trades that result from cases of stolen passwords, those submitted by a team member without the consent of his or her team mates, and/or trades that result due to human error will not be deleted from accounts.
The California Stock Market Simulation and Stock-Trak are not responsible for trades or quote prices that are incomplete, incorrect, or not received. The California Council on Economic Education and Stock-Trak may use various methods (such as time and tape analysis) to resolve disputes. The decision made by The California Stock Market Simulation and/or STOCK-TRAK is final. The California Stock Market Simulation and/or Stock-Trak has the right to adjust or delete trades that are believed to be incorrect, and the right to terminate any account that they believe may have attempted to exploit, manipulate, or sabotage any part of the SMS trading system and/or web page.
The California Stock Market Simulation and/or the management of Stock-Trak have the ultimate authority to settle disputes. The California Stock Market Simulation and Stock-Trak's liability is limited to the fee paid for the service.
The California Council on Economic Education and/or Stock-Trak has the right to adjust or delete trades that are believed to be incorrect, and the right to terminate any account that they believe may have attempted to exploit, manipulate, or sabotage any part of the SMS trading system and/or web page.
The California Council on Economic Education and/or the management of Stock-Trak have the ultimate authority to settle disputes.
The California Council on Economic Education and Stock-Trak's liability is limited to the fee paid for the service.

17. Position Limit
There is a 25% position limit meaning you may invest up to 25% of initial cash balance , $25,000, in any one stock.

The management of Stock-Trak is not responsible for trades or quote prices that are incomplete, incorrect or not received
The management of Stock-Trak may use various methods (such as time and tape analysis) to resolve disputes.
The decision made by the management of Stock-Trak is final.
Trades that result from cases of stolen passwords, those submitted by a team member without the consent of his or her team mates, and/or trades that result due to human error will not be deleted from accounts.
The management of Stock-Trak has the right to adjust or delete trades that are believed to be incorrect, and the right to terminate any account that they believe may have attempted to exploit, manipulate, or sabotage any part of the SMS trading system and/or web page.
The management of Stock-Trak has the ultimate authority to settle disputes.
The management of Stock-Trak's liability is limited to the fee paid for the service.

The California Stock Market Simulation

Further Information on Trading Rules

More on Trading Dates and Times:

When you buy stock over the Internet when markets are open, you will receive and be shown a bid / ask price for which your stock traded 15-20 minutes before you placed your order. However once you have placed your order, your trade will be executed at the actual bid/ask real-time price for that security. Your on-line confirmation will tell you the price you paid. For example, if you buy 100 shares of Coca Cola at noon, your confirmation will give you the real trading price for Coke at 11:40 am.
You can find out what the 20 minute delayed prices for stocks are through the quote screen accessible from the SMS web page.
If you buy stock when the markets are not open (i.e. after 1 pm in California) your confirmation will tell you that you will be charged the opening price of the next business day.
Please note that the opening price for a stock does not have to be the same as the closing price the day before.

More on Limit Orders:

Limit orders, or the ability to specify prices, are currently not used in this simulation. With limit orders, students frequently make mistakes with respect to price limits resulting in disappointment and misunderstanding because trades do not go through. Not allowing limit orders eliminates this problem and results in far fewer trades being rejected due to errors.

More on Margin Requirements:

A 50% margin requirement essentially means that students can borrow as much as the equity in their portfolio. For example, beginning with $100,000 equity, a team could buy $200,000 in stocks or mutual funds by borrowing $100,000. (The 50% comes from the fact that $100,000 is 50% of $200,000. They are borrowing 50% of the cost of the securities.) Actually, in this simulation, they can’t borrow quite the entire $100,000, since brokers’ commissions would come out of this.
If teams want to borrow money to short sell stocks, they must keep 50% of the current value of their short sale in cash to back up their short position. If teams spend more than their original $100,000, they will automatically borrow on margin and pay interest. If they have cash, it will automatically be used to pay off existing loans on margin accounts.
On any day that a team can no longer satisfy the 50% margin requirement, it will not be allowed to make any purchases or short sales on the following day. This is equivalent to a margin call in the real world.

More on Portfolio Statements:

You can always check your portfolio value and team ranking on the web, where it is updated every day.

Computation: The value of team portfolios, or equity, is computed as follows:
Add:
- the amount of cash (including dividends earned, interest, and proceeds from a short sale) and
- the current market value of stocks and mutual funds purchased in a long position.
Subtract:
- the amount borrowed on margin (including interest paid), and
- the current market value of stocks held in a short position.

More on the Number of Transactions:

Each team is limited to 100 transactions, in part to discourage unrealistic speculative day-trading. Budget your trades accordingly, and be careful not to use up all your trades early in the game!

More on the 3-4-25 Rule:

Teams must have at least 3 investments in their portfolio by the end of the 4th week of the simulation, and must continue to hold at least three for the remainder of the simulation.

These investments may be stocks or mutual funds. The stocks may be held in a long or short position. Teams are not required to hold the same three (3) securities from the end of week four (4) until the end of the simulation. For example, if they are holding shares of Coca Cola, Disney, and Apple, they may sell their Coca Cola if they replace it with something else at the same time.

Teams may not invest more than $25,000 in any one stock during the simulation.

The following exception applies: If the value of a stock changes while the students are holding it and this results in the value of the investment rising above $25,000, they may continue to hold this amount.
Since mutual funds are already highly diversified, the $25,000 limit only applies to stocks.
Please note that the $25,000 limit may prevent you from purchasing 100 shares of expensive stocks such as Wells Fargo or Berkshire Hathaway.

More on the End of the Simulation:

It may take two weeks to officially announce the winners of the simulation because we like to give teachers a week to present any questions or disputes they may have with respect to team rankings. We may need time to look into any questions presented.