As more and more readers turn to the financial pages each day, they are confronted by an extensive and sometimes bewildering array of statistical tables that report the results of trading in markets from stocks to commondities futures.
Last Sunday, The Washington Post published a guide to reading the stock and bond tables. What follows is a short explanation of the tables that record trading in government securities, stock options and futures: Government Securities
The federal government has hundreds of billions of dollars of debt outstanding in the form of bills -- securities that mature in less than a year -- and notes and bonds. Government agencies such as the Federal National Mortgage Association also sell securities. All are listed in the "Government Securities Traded" table.
Treasury bills are sold at a discount. That means that when the government sells them, the investor pays less than $10,000 for the bill and the interest received is the difference betwween the purchase price and the face value.
Treasury bills are traded among investors just like corporate bonds or other government securities.
A typical bill listing on Wednesday, Oct. 8 [TABLE OMITTED]
The first number tells the date the bill was mature and be paid off by the Treasury, in this case Oct. 30. Next is the bid rate, the amount of interest persons willing to buy the bill want to receive. These investors want to pay, on average, a price low enough to receive an 11.26 percent rate of return. On the other hand, those trying to sell the bill want to do so at a higher price, one sufficiently high to result in a yield of 10.86 percent.
The final figure, 11.08 percent, is what the Treasury calls the "coupon equivalent yield" of the ask rate of 10.86 percent.
When bill rates are quoted by the Treasury and in standard trading, they are done so on the basis of the so-called discount rate. Suppose you bought and paid $9,000 for a $10,000 bill that matures in one year. The discount rate (roughly) is 10 percent. However, because you really invested $9,000, the $1,000 rate of return is 11.1 percent. That is the "coupon equivalent rate."
The bid-and-ask quotation is in terms of the discount rate, while the yield figure is the coupon equivalent rate of the "ask" discount rate.
In the Treasury bill example above, the seller is offering a bill at a discount rate of 10.86 percent. In reality, for the money that bill costs, the investor will receive a real yield of 11.08 percent.
Treasury bonds and Federal National Mortgage Association bonds are listed similarly to corporate bonds. Commodity Trading
If you read about the near-collapse of the silver market last spring -- the one that nearly brought down a few brokerage houses and the billionaire Hunt brothers of Dallas -- you've heard of one commodity arena.
In recent years, commodity trading has become one of the hottest areas for investors. This is mainly because an investor can control a contract worth lots of money for a relatively small amount of up-front cash. Futures contracts are traded not only in commodities -- as diverse as precious metals soybeans and plywood -- but also in financial instruments such as Treasury bills. Most important futures trading occurs in Chicago or New York.
In futures trading, investors buy and sell contracts that obligate them to:
Buy a specified amount of a commodity at a predetermined date and a predetermined price, or
Sell a certain amount of a commodity at a specified price and date.
Originally commodities futures markets, as they are called, were developed to help commodity users and producers -- from farmers to grain millers to photographic film makers (who use silver) -- ensure the price at which they would buy or sell the product in the future.
Today, although some of the hedging aspects of the markets remain, more and more investors are entering the commodities field purely for profit -- or speculation, as traders say.
Although the contracts specify that the commodity must be delivered or received, in practice the contracts are usually a purely financial set of transactions that are closed out before delivery date occurs.
There are peculiarties to every futures contract, but, as an illustration, the silver contract helped on the Commodity Exchange of New York is helpful.
The investor puts up a "margin" -- something similar to a bond -- for the right to control a contract of 5,000 ounces of silver. The contracts expire in a number of different months, just as do stock option contracts. In last Thursday's edition, the results of trading the December silver contract on Wednesday were: [TABLE OMITTED]
Silver is quoted in cents per ounce. Trading in December silver opened at $21.35 per ounce, rose as high as $21.58 and fell as low a $21.20. At the end of the day, silver futures for December delivery closed at $21.44 an ounce, 3.1 cents higher than the close on Tuesday reported in Wednesday's edition.
Investors who felt the price of silver would fall -- that is, promised to deliver -- lost 3.1 cents an ounce that day, while those who bought contracts requiring them to buy silver made 3.1 cents on the day. On a 5,000-ounce contract, the losses or the profits were $155.