Understanding Stock Actions: Values and Trading

A) Basic Concepts on Stock Actions

Nominal Value

The nominal value is the value assigned to each action in its respective title or entry form. The law requires that all actions of the same series possess the same nominal value.

Cash Value

The cash value is the market value or trading price on the exchange. This value depends on the supply and demand for the security.

Theoretical Value

The theoretical value is the price an action should reach in the market, based on objective criteria such as the company's accounting or the assets that generate dividends. It serves as a benchmark to evaluate whether the market price is expensive or cheap.

Capital and Subscription Rights

Large corporations raise equity capital, and shareholders can obtain additional income through the sale of preemptive rights.

We must distinguish the following aspects:

• The ratio of shares outstanding prior to enlargement and the new shares to be issued (NxV EXPRESS).
• During expansion, the subscription right is separated (cleaved) from the old stock and is traded on the market independently. Every existing share grants one subscription right.
• If the rights holder does not issue an order to sell them or apply them to subscribe for new shares, the right is automatically sold on the last day of the expansion period; otherwise, it is lost.

Theoretical Value of Subscription Rights

The value of subscription rights is determined by supply and demand in the market where they are quoted. To establish a reference price, the theoretical value of subscription rights is calculated using the formula: Ds = Nn (Vv - Vn) / Nv + nn.

Sale of Shares

To buy or sell shares, an order must be given to the intermediary responsible for executing it. These brokers must be members of the stock exchange and belong to one of the following entities:

• Securities firms
• Brokers
• Credit institutions

The individual wishing to enter the market at their own risk should open a securities account and deposit the necessary funds with the chosen intermediary. The investor may also sign a portfolio management contract with an intermediary who will report results regularly.

Derivatives: Options and Futures

Options

• An option is a legal contract to sell or buy an underlying asset (stocks, bonds, etc.) at a specified price (the exercise price) on a predetermined date (European option), or anytime before that date (American option). In exchange for this right, the buyer pays an amount, known as the premium, at the time of purchase.
• The buyer of an option has the right to exercise the option but is not obligated to do so.
• The option seller is obligated to comply with the buyer's choice.