LESSON #3

SHOWTIME ON WALL STREET

LESSON
OBJECTIVE
POINT TO
PONDER
ESSENTIAL
QUESTION
CONTENT
Outline the
content you will
teach in this
lesson.

I. DEFINE OBJECTIVES AND CONTENT

Discover how diversification can maximize return while
minimizing risk.
Never put all your eggs in one basket.
What knowledge is necessary to make effective financial
decisions for personal financial horizons?
5.Diversify - Dont Put All Your Eggs In One Basket
a. A wise investor does not put all of his/her eggs in one
basket; he or she diversifies the types of stocks in his/her
portfolio.
b. If one stock is not doing well, the other stocks in the
portfolio may be doing much better, so your portfolio will stay
healthy
c. Dow Jones has classified stocks into Sectors or groups
based on the product(s) the company sells
i. sectors can be compared to grocery stores-divided into
sections such as bread, dairy, meat, produce
ii. stock market is divided into sectors similar to the grocery
store based on what the different companies sell for products or
services
d. Healthcare
i. Express Scripts
ii. Johnson & Johnson
iii. Merck
e. Technology
i. Apple
ii. Facebook
iii.Google
iv.IBM
f. Consumer Discretionary
i.Disney
ii.McDonalds (MCD)
iii. Target
iv.Yum! Brands (YUM)
g. Consumer Staples
i. Coca-Cola (KO)
ii. Kellogg (K)

iii. Walmart
h. Other sectors
i. Communication Services
ii. Energy
iii. Financial Services
iv. Industrials
v. Materials
vi. Utilities

What will students

UNDERSTAND
as a result of this
lesson? How does
this connect to the
Essential
Question?
What will students
be able to DO as
a result of this
lesson?
HOOK
Describe how
you will grab
students
attention at the
beginning of
the lesson.
BE
CREATIVE.

II. PRE-PLANNING
Students will understand why markets are necessary for
trading stocks and how markets operate
Students will understand that a buyer and seller trade a
stock because they both expect to benefit

Students will compare and contrast the benefits received

by buyers and sellers when they trade a stock
Students will analyze how brokers help make stock trades
possible
III. PLANNING
TIME: 3 minutes
Salmonella Strikes (basket of purple eggs represents a sector):
Discuss what would happen if the purple eggs were
contaminated with Salmonella, you could not use them- NO
EGGS! out of luck for breakfast. If, however, I had bought a
variety of eggs (pink, yellow, green, blue); I had
DIVERSIFIED, I would still have some eggs that I could use;
similar to the stock market. Resource:
http://education.howthemarketworks.com/beginners/choosing
-investments/beginner-strategy/how-do-i-diversify-a-portfolio/

INSTRUCTION TIME: 75 minutes

Explain Step Discuss Sectors-grocery store comparison(5)
by-step what
Research the company found in colored egg you received.
you will do in
(7)
this lesson. Be
o What sector does company belong to?
explicit about
o Describe the product/service company provides.
ties to Points to
o What is the ticker symbol?
Ponder,
o Explain how this company compares/contrasts to
Essential
another within its sector
Question, and
Provide thinking map as visual to display companies within their
Interactions
sectors.
here. Include

ALL support
and teaching
materials with
your unit.

Vocabulary Graffiti Wall: use Flocabulary.com (teacher login

required) broker: a person who buys and sells goods or assets for
others. diversity: variety of stocks
sectors: a group of companies that operate in the same

segment of the economy or share a similar business type.

Health Care (Express Scripts, Johnson & Johnson)

Technology (Apple, Inc., Facebook, Google, IBM)
Consumer Discretionary (Disney, McDonalds, Target, Yum!
Brands)
Consumer Staples (Coca-Cola, Kellogg, Walmart)
We will focus of the 4 listed above, but others are Communication
(AT&T), Energy (Suncor Energy, Chevron), Financial Services
(BB&T, Wells Fargo), Industries (3M Company, Deere), Materials
(Dupont, Praxair)
primary stock: newly issued shares of common stock that are sold to
investors. secondary stock: A stock that is considered riskier than
blue chips because it has a smaller market capitalization. A
secondary stock can relate to any type of company, in any industry.
(5)
Readers Theater and activity Trading Stocks on Wall Street
(15) worksheet used as assessment.
Stock market online game: remember to DIVERSIFY your
PORTFOLIO (15-20)
Skype with financial advisor (15-20)
ASSESSMENT
(Performance
Task) What will
the students
DO to
demonstrate
that they have
mastered the
content? Be
specific and
include actual
assessment
with unit
materials.

TIME: 5 minutes
Trading Stocks on Wall Street (see below)
Student will use information learned from Readers Theater to put
the events in order. They will work in their teams to complete.

DOES THE ASSESSMENT ALLOW YOU TO DETERMINE WHETHER OR NOT THE

STUDENTS HAVE MET YOUR STATED LESSON OBJECTIVE? YES OR NO
ASSESSMENT AND INSTRUCTIONAL MATERIALS
Insert ALL materials here including Assessments and Instructional Materials.

Explicitly LIST any additional files for this lesson. Be sure that ALL materials have been
submitted for this lesson.

Readers Theater and activity Trading Stocks on Wall Street

MODERATOR:
In order to understand how the stock market works, lets begin by
visiting a buyer of stock whose shares are listed on the New York
Stock Exchange.
BUYER:
[reading the stock pages of a newspaper] Ive wanted to buy stock in
McDonalds, the fast food company, for a long time. I think Ill call my
stockbroker and find out what the stock is selling for right now.
[dials number on telephone] Hello, Stockbroker? Would you please
tell me what is the price of McDonalds?
BUYERS
STOCKBROKER:

[answering the telephone] Certainly, Buyer. Let me check for you

[looks at a computer]. The last sale of McDonalds was forty and an
eighth.

BUYER:

Thats a great buy. I expect the price to rise and the company to pay
big dividends in the future. Id like to order 100 shares.

BUYERs
Stockbroker:

Okay, Ill get on it right away. But first, tell me if you want to buy at
the market or if you want me to enter a limit order for you.

MODERATOR:

An order to buy or sell at the market tells the broker to take the best
price being offered on the trading floor of the New York Stock
Exchange. A limit order tells the broker to buy or sell at a given or
better price.

BUYER:

Buy it at the market.

BUYERS
STOCKBROKER:

I should be able to confirm the purchase right away. Ill call you back
in a few minutes.

SELLER:

[reading the stock pages of a newspaper] Ive been thinking about

selling some of my shares of McDonalds stock. I think Ill call my
stockbroker [dials number on telephone]. Hello, Stockbroker? Whats
McDonalds stock selling for right now?

SELLERS
STOCKBROKER:

[answering the telephone] Let me see [looks at a computer]. The last

sale in MCD was forty and an eighth.

SELLER:

I should sell at that price. I bet if I keep the stock its price will fall and
the company will pay lower dividends in the future. Please sell 100
shares for me.

SELLERS
STOCKBROKER:

I can do that right away. But do you want to sell at the market or do
you want me to enter a limit order for you?

SELLER:

Sell my shares at the market.

SELLERS
STOCKBROKER:

Ill do that now and call you back in a few minutes.

MODERATOR:

The buyer and seller have placed their orders with their
stockbrokers. Lets watch as those orders are sent to the stock
exchange to be completed.

BUYERS
STOCKBROKER:

[Goes to order machine and presses buttons] First, I have to send

this order to buy 100 shares of McDonalds (MCD) stock to my
companys clerk on the floor of the New York Stock Exchange.

BUYERS CLERK:

[noticing that the order machine is running] The order machine is

running again. It must be another order from one of our offices. Lets
see what it says. [Reads.] Buy 100 shares of MCD stockthats
McDonalds. Id better give this order to our companys broker on
the floor. [Clerk signals his companys
representative on the trading floor.]

BUYERS FLOOR BROKER: Theres my clerk signaling me. Id better see

whats up. [The broker goes to a booth on the side of the
trading floor, gets the order, and reads.] Buy 100 shares
of MCD stock at the market. Ill have to do that at the
McDonalds trading post. [The floor broker walks there.]
MODERATOR: Now lets see how the sellers stockbroker handles the sellers
order.
SELLERS STOCKBROKER:
[goes to order machine and presses buttons] I
have to send this order to sell 100 shares of McDonalds
(MCD) stock to my companys clerk on the floor of the
New York Stock Exchange.
SELLERS CLERK: [noticing that the order machine is running] Here comes
another order from one of our offices. [Reads.] Sell 100
shares of MCD stockthats
McDonalds. Ill deliver this order to our companys broker
on the floor.
[Clerk signals his companys representative on the trading
floor.]

SELLERS FLOOR BROKER: I see my clerk signaling me. Id better see

whats up. [The broker goes to a booth on the side of
the trading floor, gets the order, and reads.] Sell 100
shares of MCD stock at the market. Ill have to do that
at the McDonalds (MCD) trading post. [The broker
goes to the MCD trading post where the buyers floor
broker is standing.]
MODERATOR: Stock exchanges have various locations called posts, where
different stocks are traded. Each post has a specialist
assigned to it. One of the jobs of a specialist is to quote
the current price of a stock. Lets see what happens when
the stockbrokers for the buyer and seller take their orders
to the specialist at the MCD trading post.
BUYERS FLOOR BROKER: [walks over to the MCD trading post, where other
brokers have orders to buy or sell MCD stock and looks at
imaginary video screen] Hows McDonalds?
SPECIALIST:
Forty to forty and a quarter.
MODERATOR: The first number the specialist said is the current bid price. This
price of $40 is the highest price buyers are willing to pay
for a share of McDonalds stock. The second price is the
asked price. This price of $40.25 is the lowest amount
sellers are willing to accept for a share of MCD.
SELLERS FLOOR BROKER: [approaches the MCD trading post, checks the
video screen and announces to the group of brokers] One
hundred at forty and a quarter.
MODERATOR:

This means that the broker is offering to sell 100 shares at $40.25.

SELLERS FLOOR BROKER: [hearing no response from the crowd of brokers] One
hundred at forty.
BUYERS FLOOR BROKER: [approaches sellers floor broker] Sold!
MODERATOR: Standing next to the post is an employee of the stock exchange,
called a floor reporter. Within seconds, the floor reporter
records the sale on the computerized Market Data System.
The new sale price is then reported on the computer
monitor at the stock exchange and MCD 100 40 flashes on
electronic displays around the world.
BUYERS FLOOR BROKER: Now Ive got to let our clerk know about this trade.
[The broker walks over to the buyers clerk.] Hi, Clerk, I
just bought those 100 shares of McDonalds at forty.

BUYERS CLERK: Thanks. Ill send a message back to our stockbroker. [The clerk
then presses numbers on the order machine.]
BUYERS STOCKBROKER: [hearing the order machine] The order machine is
going again. Lets see what weve got. [Reads and
comments.] Good, we bought those 100 shares of
McDonalds for our buyer. Id better let him (her) know.
[The broker calls the buyer on the telephone.] Hello,
Buyer? We got you the 100 shares that you wanted of
McDonalds at $40 a share. Ill get a confirmation in the
mail to you today. Youll need to pay us $4,000 plus my
brokers commission.
BUYER:
MODERATOR:
happening.

Great! I knew youd do it, but I didnt expect you to be so

fast. I called you only ten minutes ago.
The seller also receives good news. Lets check and see whats

SELLERS FLOOR BROKER: I have to tell our clerk about the sale. [The broker walks
over to the sellers
clerk.] Hi, Clerk. I just sold those 100 shares of McDonalds stock at forty.
SELLERS CLERK: Thanks. Ill tell our stockbroker back in our office. [The clerk then
presses numbers on the order machine.]
SELLERS STOCKBROKER: [hearing the order machine] Somethings coming
in on our machine. [Reads and comments.] Good news,
we sold those 100 shares of McDonalds for our seller.
I better let him (her) know. [The broker then makes a call
to the seller on the telephone.] Hello, Seller? We sold
your 100 shares of McDonalds for $40 a share. I will
send confirmation of the sale and a check for $4,000 less
my brokers commission.
SELLER:
Great! And it took less than 10 minutes.
MODERATOR:
The stock market allows people to buy and sell stocks quickly and
easily. Both our buyer and seller are happy with the trade because they both benefited
from the trade. And, they are pleased that the brokers and people at the stock exchange
made the trade possible by helping the buyer and seller find each other. This is how
markets work and why they are so important to the economy.

TRADING STOCKS ON WALL STREET

Name __________________________ Date _________________
Directions: Each of the statements below describes one of eight steps in trading a
stock on the New York Stock Exchange. Put the steps in the correct order by
numbering them 1 for the first step through 8 for the last step.
_______ A. A clerk working for the same brokerage company as the
stockbroker gives an order to the companys floor broker, who
works on the floor of the stock exchange.
_______ B. Two floor brokers on the exchange floor who represent Brians and
Saras orders agree on a price.
_______ C. Brian pays for the stock and his brokers commission and has
100 shares of Disney stock added to his account. Sara receives
money from the sale of her stock, minus her brokers
commission.
_______ D. Sara Davis, in Atlanta, Georgia, wants to sell 100 shares of her
Disney stock to help pay for her new car. Brian Jones, in Omaha,
Nebraska, wants to buy stock in Disney. They each call their
brokers and ask for quotes (the highest bid and lowest offer) on
Disney stock.
_______ E. Two floor brokers, each with an order to buy or sell Disney stock at
the market, go to the trading post. They compete with other brokers
to get the best price for their customers.
_______ F. Using an electronic data system, brokers give Brian and Sara the
latest quotes on Disney stock. Sara decides to sell at the market,
and Brian decides to buy at the market.
_______ G. Clerks at the stock exchange send confirmation of the deal to Brians and
Saras stockbrokers.
_______ H. The two stockbrokers representing Sara and Brian send their
orders to the floor of the NYSE. Clerks of the two brokerage firms
receive these orders on the sidelines of the trading floor.