Netflix Last week, we celebrated the 30th anniversary of «Trading Places,» the greatest movie about finance ever made, with an oral history of the film. But we wanted to zero in on what is arguably the most complicated, real-life climax in cinematic history, because a lot of people get confused about what actually happened. Earlier in the film, Mortimer and Randolph Duke, the two corrupt, septuagenarian brothers who run a commodities brokerage house, arrange to get an advanced copy of the USDA’s monthly orange crop report. These crop reports are real, and you can find a calendar of them. The report the Dukes receive indicates extensive damage to the Florida orange crop, due to a hard freeze. So they order their agent to buy a ton of orange juice futures right before the data is officially announced, on the premise that the freeze will cause a shortage of oranges and the value of the contracts to surge. It confirms what they want to hear, that the crop was badly damaged. In fact, the real crop report showed that the freeze wasn’t that bad.
By using our site, you acknowledge that you have read and understand our Cookie PolicyPrivacy Policyand our Terms of Service. I was watching a movie called «Trading Places» and it’s about stocks. I need help because I don’t understand stocks. A stock was for that was the highest then when it reached the highest a guy said Sell at What does that mean? And it was going down little by little down all the way to A guy knew what was going to be the outcome so he was buying low like a lot. But how does he earn money?? He buys them low and he is wasting money because he is just buying low. And stocks closed. How does he earn money?! Stocks never went up. They are not selling stocks. They are selling OJ futures contracts. Selling a futures contract at gives the buyer the right to buy a fixed number of pounds of orange juice concentrate «OJ» on a future date at cents per pound.
Trading Places: How Winthorpe and Valentine Pulled It Off
Considered a classic comedy of the 80s and one of the movies that launched Eddie Murphy’s career, can you honestly say you understand the end of ‘Trading Places’? If you’ve never seen the movie, you’re missing out. But long story short, Randolph and Mortimer Duke are rich commodity brokers who are at odds over the battle of Nature vs Nurture. The Dukes create a bet and plan to discredit their top employee, Louis Winthorpe III, and put a con-man, Billy Ray Valentine, in his place to see if their surroundings will cause Valentine to succeed and Winthorpe to turn to crime. While this is going on, the Dukes are also arranging to get a copy of the orange crop report in order to corner the market during the upcoming exchange at New Years. When Winthorpe and Valentine find out about the bet and the Dukes’ plan to corner the market, they get the drop of the Dukes during the exchange, getting rich themselves and causing the brothers to lose their vast fortunes. While the scene on the exchange floor is the climax of the film, not many people really understood what Winthorpe and Valentine did. We gathered that they pulled a fast one on the Dukes, but exactly how? NPR spoke with an expert in orange juice trading and found out how their plan worked.
Understanding Futures Contracts
Investors make money when they buy low and sell high. Either way, they make a lot of money. It starts with some insider information. Aykroyd and Murphy steal a report that will cause the price of orange juice to fall, and replace it with a report that says OJ prices will rise. They do this because they know their enemies, the Duke brothers, will trade on the phony report. Moving to the big scene, the Duke brothers, through their trader, starts buying OJ futures. Then everyone buys. The value skyrockets. Once the price gets to a high point, and the whole market thinks the price will only go up, Aykroyd calls out a promise to sell OJ at that high price in the future. Essentially he is making a bet that the price will fall. Basically, he buys a lot of orange juice for very cheap, and sell it for a lot of money. Lots of stuff in Trading Places , including insider trading, is illegal. Trading commodity futures is also a terrific way for individual investors to end up as broke as the Dukes at the end of the movie.
Read More From TIME
Stock trading is not a risk-free activity, and some losses are inevitable. However, with substantial research and investments in placse right companiesstock trading can potentially be very profitable. While stock trading can be risky, you might be able to make a lot of money if you do your research and invest in the right companies.
Start by researching current market trends from trustworthy publications, like Kiplinger, Bloomberg BusinessWeek, and the Economist. Then, decide which trading sites you’d moneh to use, and make an account on 1 or more of the sites. If you can, practice trading before you put any real money in the market by using market simulators. When you’re ready to trade, choose a mixture of reliable mid-cap and large-cap stocks, and monitor the markets daily.
Uow tips from our financial reviewer on buying and selling stocks for profit, read on! This article was co-authored by Michael R. Michael R. Lewis is a retired corporate executive, entrepreneur, and investment advisor in Texas. Categories: Making Money Online. Log in Facebook Loading Google Loading Civic Loading No account yet?
Create an account. Edit this Article. We use cookies to make wikiHow great. By using our site, you agree to our cookie hos. Article Edit. Learn why people trust wikiHow. Co-authored by Michael R. Lewis Updated: September 3, There are 22 references cited in this article, which can be found at the bottom of the page.
Research current trends. There are many reputable sources that report on market trends. Select a trading website. Be sure that you are aware of any transaction fees or percentages that will plaaces charged before you decide on a site to use. You might want to read reviews of the business online. Create an account with one or more trading websites.
Be sure to check out the minimum balance requirements traeing each site. Your budget may only allow you to create accounts mpney one ob two sites. Practice trading before you put real money in. Some websites such as ScottradeELITE, SureTrader, and OptionsHouse offer a virtual trading platform, where you can experiment for a while to assess your instincts without putting actual money in.
In real trading, there will be a delay when buying and selling stocks, which may result in different prices than you were hwo. Additionally, trading with virtual money will not prepare you for the stress of trading with your real money.
Choose reliable stocks. You have a lot of choices, but ultimately you want to buy stock from companies that dominate their niche, offer something plcaes people placea want, have a recognizable brand, palces have a good business model and a long history of success.
A more profitable company usually means a more profitable stock. You can find complete financial information about any publicly traded company by visiting their website and locating their most recent annual report. If it is not on the site you can call the company and request a hard copy. Analyze rtading balance sheet and income tradiny and determine if they are profitable or have a good chance to be in the future.
If plaxes technology stocks were down at one point, evaluating them relative to each other placed than to monfy entire market can tell you which company has been on top of its industry consistently.
First, analyze the company’s quarterly earnings release that is posted online as a press release about an hour before the. Buy your first stocks. When you are ready, take the plunge and buy a small number of reliable stocks. The exact number will depend on your budget, but shoot for at least two.
Begin trading small and use an amount of cash you are prepared to lose. You just have to be careful to avoid large transaction fees, as these can easily eat up your gains when you have a small account balance. Invest mostly in mid-cap and large-cap companies. Monitor the markets daily. Remember the cardinal rule in stock trading maie to buy low and sell high.
If your stock value has increased significantly, you may want to evaluate whether you should sell the stock and reinvest the profits in other lower priced stocks. Consider investing in mutual funds.
Mutual funds are actively managed by a professional fund traading and include a combination of stocks. These will be diversified with investments in such sectors as technology, retail, financial, energy or foreign companies. Buy low. This means that when stocks are at a relatively low price based on past history, you buy. To determine if a stock is undervalued, look at the company’s earnings per share as well as purchasing activity by company employees.
Look for companies in particular industries and markets where there’s lots of volatility, as that’s where you can make a lot of money. Sell high. You want to sell your stocks at their peak based on past history. If you sell the stocks for more money than you bought them for, you make money.
The bigger the increase from when you bought them to when you sold them, the more money you make. Do not sell in a panic. When a stock you have drops lower than the price you bought it for, your instinct may be to get rid of it. While there is a possibility that it can keep falling and never come back up, you should consider the possibility that it may rebound. Study the fundamental and technical market analysis methods. These are the two basic models of understanding the stock market placse anticipating price changes.
The model you use will determine how you make decisions about what stocks to buy and when to buy and sell. This analysis seeks to give an actual value to the company mony, by extension, the stock. A technical analysis looks at the entire market and what motivates investors to buy and sell stocks. This involves looking at trends and analyzing investor reactions to events.
Consider investing in companies that pay dividends. Some investors, known as income investors, prefer to invest almost entirely in dividend-paying stocks. This is a way that your stock holdings can make money even if they don’t appreciate the price. Dividends are company profits paid directly to stockholders quarterly. Diversify your holdings. Once you have established some stock holdings, and you have a handle on how the buying placez selling works, you should diversify your stock portfolio.
This means that you should put your money in a variety of different stocks. Start-up companies might be a good choice after you have a base of older-company stock established. If a startup is bought by a bigger company, you could potentially make a lot of money very quickly.
If your original holdings are mostly in technology companies, try looking into manufacturing or retail. This will diversify your portfolio against negative industry trends. Reinvest your money. When you sell your stock hopefully for a lot more than you tney it forddid should roll your mak and profits into buying new stocks.
Consider putting a portion of your profits into a savings or retirement account. Invest in an IPO initial public offering. An IPO is the first time a company issues stock. Take calculated risks when selecting stocks. The only way to make a lot of money in the stock market is to take risks and get a little bit lucky.
This does not mean you should stake everything on risky investments and hope for the best. Investing should not be played the same way as gambling. You should research every investment thoroughly and be sure that you can recover financially if your trade goes poorly. On one hand, playing it safe with only established stocks will not normally allow you to «beat the market» and gain very high returns. However, those stocks tend to be stable, which means you have a lower chance of losing money.
And with steady dividend payments and accounting for risk, these companies can kn up mzke a much better investment than riskier companies. You can also reduce your risk by hedging against losses on your investments.
Trading Places
Robert Smith. Feeling good. It’s been 30 years since Trading Places came. And, to be honest, I never really understood what happened at the end of that movie.
The Hard Numbers
But what actually happens? How does it work? I recently talked to Tom Peronis, a guy who has spent years trading OJ options. He walked me through every step of Winthorpe and Valentine’s plan. The Duke brothers — two old, rich guys — have bribed someone to get an advance copy of a government report on the orange crop. This will give them inside information on what’s going to happen in the market for frozen concentrated orange juice. But Winthorpe and Valentine find out what the Dukes are up to, and they manage to steal the crop report before the Duke brothers get it. The report says the orange crop is strong. When the rest of the world learns this, the price of OJ will fall. So Winthorpe and Valentine create a fake crop report that they put into the hands of the Duke brothers. The fake crop report says the crop was bad.
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