How to Play

A player’s objective in the Stock Trading Game is to amass the portfolio of stocks and cash with the greatest liquidation value.

All players start with the same portfolio of five shares in each of four “companies” valued @ $40/share, plus $200 cash, for a total portfolio of $1000. They then buy and sell stocks based on public and private information about each company revealed to them over the course of the game. At the end, a player’s portfolio is valued at the underlying value of a company’s stock times the number of shares they own plus the cash they have.

Rules

Individual Play

• Each player starts with the same portfolio and must trade at least once;
• Players may share information with other players.

Buy and Sell Transactions

• Players may place limit or market orders;
• Players may hold positive or negative (short) positions.

Credit Constraints

• Players can short up to 5 (negative) shares of each compan;
• Players can borrow up to $200 @ 10% (negative cash);
• Players may sell shares (or spend cash) that they don’t own.

Game End

• Liquidation values of all 4 stocks are revealed (the sum of each stock’s 10 cards);
• Market (Buy + Hold) value + return is computed;
• Player portfolio value + return + rank is computed;
• Game Leaderboard is presented.

Ending/Liquidation Value of Stocks

Each stock is the sum of 10 playing cards randomly drawn at the beginning of the game (automated and hidden from view). The value of each card varies according to the card’s numerical value and color (black or red). Below is a summary of how card values are determined:

• Cards 2-9 are face value
• Face cards (Jack, Queen, King) equal 10, Aces equal 20
• Black cards = Card Value x (2)
• Red cards = Card Value x (-1). Note that all red cards reduce the overall value of a stock since they are negative. 

Example: Assume that Orange stock is composed of the following ten cards.

• Black cards: J, 9,8,6,4 = 20+18+16+12+8 = 74
• Red cards: A, Q, J, 8, 2 = -20-10-10-8-2 = -50
• Thus, Orange’s liquidation value = 74 + (-50) = 24

Getting and Using Information

Players gain information about each company through public sources: two Stock Analyst Reports (SARs), and one Earnings per Share (EPS) report for each company released during the course of play. Players may also purchase private “peeks” of three randomly chosen cards from a company’s underlying stack. The players therefore have access to three sets of incomplete information about each company:

• Security Analyst Reports (SARs): Each report reveals the sum of five randomly chosen cards from a company’s stack + $20
• Earnings per Share (EPS): For each company, one card is deleted, one card is added, and the difference is reported
• Private Information: For $1, players may “peek” at 3 randomly selected cards. They may buy as many “peeks” as they like; each time the cards are chosen at random from a company’s underlying stack.

While private peeks can be purchased at any time during the game, public information is released according to a schedule:

Trading

Players can buy, sell, or hold shares of stock through market orders, limit orders, bids, and asks. Players can also take out cash loans and hold negative positions (also known as “short selling”).

End of Game

When time runs out, all stocks are liquidated and their true value revealed. A leaderboard shows who successfully beat the market, and who claimed the top spot!

Since liquidation values, earnings reports, and market trades are based upon randomly generated information, every Stock Trading Game unfolds differently. Players may experience an up market, a down market, or anything in between. Playing several rounds of the game affords students the opportunity to practice computing annualized returns.