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km.txt
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1997-02-14
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Here is some info to help you figure things out...
Komodo Market is a game of trading and speculation in the equities and options
markets. The idea, of course, is to make money. You start every game with $10,000.
A game ends if you go too far in the hole and under other circumstances.
Every attempt has been made to make Komodo Market as realistic as possible. The
types of trades you can make in Komodo Market are the same as in the real world.
You get to buy and sell stock with cash or on margin. You can buy and sell both
equity and index options. Purchased options can be exercised or closed out. Sold
options can be closed out or may be exercised against you (called-from and put-to).
You can borrow money from Komodo Bank. Just like in the real world, too, you have
a monthly income and expenses, both of which you can adjust with some restrictions.
Just like in the real world, youÆll get margin calls and mailed confirmations from your
broker. Komodo Broker will do other realistic things like exercise certain option
positions to cover sold positions, and may sell out any long stock to cover cash shortfalls.
Not all orders can be filled immediately, and you can place AON (all-or-none) and Any-
Part orders. You can place price limits on both buying and selling stock. In "short",
Komodo Broker behaves just the way a real broker would with few exceptions. Komodo
Broker will let you go on trading even if you have a lousy record, but wonÆt fill any
orders unless you have enough cash.
You donÆt get any rest. Just like in the real world, trades keep on happening
regardless of what you do. Watch the ticker bar at the bottom of the screen. From time-
to-time news headlines will affect the direction of a stock. Watch the news bar at the
bottom of the screen.
There are trends just like in the real world. Each company has detailed trading
histories including high/low/close and volume graphs, and two years worth of financial
statements. Each company has an insider whose trading habits you can research. There
are economic and governmental indicators that affect the market. All of these factors
affect stock prices just like in the real world. And there is much more.
You can change the length of time one day equals. If you set a day equal to 30 seconds,
1 year takes about 2 hours, 10 minutes. Each new game generates about 6 months worth of
historical trading and economic data. Games can be saved and re-started at your pleasure.
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How to use the interface:
ItÆs pretty easy to use Komodo Market (they said). You can use the mouse for just
about everything.
When you see a company name by itself in a list, just double-click the name to see
the corporate statements and trading history. When you get confirmation mail, double-
click the envelope to open it. The "Listed Companies" and "Available Options" windows
have pop-up menus when you right-click a selection. Right-clicking in the "Listed
Companies" window brings up a menu equivalent to the "Trading" menu at the top of the
screen. Right-clicking in the "Available Options" window brings up a trading menu for
options.
When entering a trading order, you can use the up or right arrows to increase the
quantity or price of the order. You can use the down or left arrow to decrease the
quantity or price.
You can use the mouse or tab key to move from editing field to editing field in a
window. Pressing Shift+Tab at the same time will move you backwards through editing
fields. (Standard WindowsÆ clipboard features such as Ctrl+X for cut, Ctrl+C for copy,
Ctrl+V for paste are all supported, but it is not expected youÆll need them.)
ThatÆs it, really (they said). The mouse, up, down, left, right arrows, the tab or
Shift+Tab keys. With this knowledge, all it will take is a little experimentation to
learn all the windows to get the info you want and to place orders.
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Getting Started:
Start Komodo Market by double-clicking its icon. Follow the on-screen prompts to
start a new game or open a saved game.
Then start trading. In the "Listed Companies" window, select a company and then
right-click or choose "Buy stock..." from the "Trading" menu. If you want to research
the company first, either double-click the company name in the "Listed Companies" window
or choose the "Corporate Statement" button in the buy stock window.
Once youÆve placed an order or two, youÆll want to see the trading account
maintained by your broker. Just select "Trading account..." from the "Information"
menu. From the Trading Account window, you can place secondary orders; that is,
selling stock, and closing out or exercising options.
The sequence of trades executed by your broker in certain circumstances can be
confusing for inexperienced investors. For example, if you were called from on an
uncovered option, your broker may exercise any covering long option positions and/or
buy stock at market price to cover the call. Your broker may then sell out any long stocks
to cover cash shortfalls. Komodo broker is as heartless as any real broker, but the point
is the sequence of events is difficult to follow. To help you understand what Komodo
Broker is doing, you may want to open the "Trading commentary..." window from the
"Information" menu.
Other than that, experiment. If you lose all your money, you can try borrowing money
from Komodo Bank, or, if itÆs close to the end of a month, wait until your monthly
income gets paid. (By the way, you do pay income tax on your monthly income.) Or, just
start a new game.
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About options:
There are two types of option contracts: "calls" and "puts". Both calls and puts
can be purchased or sold by investors.
When you buy a call or put, you obtain certain rights. If you buy a call, you
acquire the right to purchase a specific underlying interest at a specific price
during a specific time period. If you buy a put, you acquire the right to sell a
specific underlying interest at a specific price during a specific time period.
Conversely, if you sell a call, you are obligated to sell a specific underlying
interest within a specific time if the option contract is "exercised". If you sell a put,
you are obligated to buy a specific underlying interest within a specific time if the
option contract is "exercised".
Investors who purchase an option contract pay a "premium" to the investor who is
selling the contract. Both sides pay trading commissions.
If you buy an equity/stock call option, you can "exercise" the options to buy the
underlying stock at the "strike" price. If you sold the calls, you would have to
sell the stocks (even if you don't own them, in which case, your broker will buy at
market to meet the contract).
If you buy an equity/stock put option, you can "exercise" the options to force the
seller to buy at the strike price.
So, if you think the price of the underlying stock will go up, you could buy calls
or sell puts. If you think the price will go down, you could buy puts or sell calls.
Index options differ from equity options in that index options are cash settled.
That is, no actual securities exchange hands. The settlement value of the transaction
is determined, and that value is paid to the buyer (who exercised the options) by the
seller. If the options are not exercised, then the seller makes a net profit from the
premiums he/she received when the options were sold. Also, index options have a
"restricted" exercise date -- they can only be exercised on the day before their expiry
date. Be careful.
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How to Read the Ticker Bar:
You will want to learn how to read the ticker bar at the bottom of the program
window to understand, and to be able to spot, the various trades being made on
the exchange. You'll see trades for both stocks and options. You can slow down
or speed up the ticker bar through settings in the "Preferences" window from the
Information menu.
Here is a typical stock trade that might appear in the ticker bar ...
... 2000KOMO12.375 ...
... 2000 KOMO 12.375 ...
... this means 2000 shares of KOMO traded at $12.375. KOMO is the ticker
symbol for Komodo Software. But were they bought or sold? Trick question!
Obviously, each trade must have a seller and a buyer. There are always two
parties to a trade.
Okay, that's easy. But option contracts are more complicated. Let's look at
those next.
Here is a typical trade of 10 contracts of Komodo Software calls with a
strike/exercise price of $12.50, an expiry date of Nov. 30th, traded at a premium
of $1.00 ...
... 10Nov30KOMO12.50Calls1 ...
... 10 Nov. 30 KOMO 12.50 Calls 1 ...
10 contracts represents 10 X 100 shares/contract = 1,000 shares. The
purchaser pays 1000 X $1 premium = $1,000 to the seller of the contracts. If the
purchaser doesn't exercise the options by Nov. 30th, they expire worthless (which
is exactly what the seller is hoping for).
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