STOCK PECULATION. Entered according to Act of Congress in the year 1875, by L. W. Hamilton & Co., in the Office of the J rarian of Congress, at Washington. INTRODUCTORY. The main feainres of Stock Speculation are familiar to all frequenters 01 Wall Street, but for the benefit of those who have not had an oppor- | tunity to observe the methods of business at the Stock Exchange, we | have compiled a brief outline of the principal points of such operations, which will be found of great assistance to those seeking information on this subject. The value of clearness, fullness, and accuracy of expression, in any- thing written for the purpose of conveying information about Wall Street aflfairs, to persons who have no practical acquaintance with them, is best appreciated by those who have vainly attempted to get some definite ideas out of the ordinary articles and publications relating to this subject. The writers, having themselves been long familiar with the financial world, forget that many of their readers have little knowl- j : edge of its language, or its ways, and consequently fail to express 1 themselves in such a manner as to be generally understood. In fact, it requires no ordinary degree of skill and care to give to persons who have had no experience in Wall Street, a clear and com- plete view of the way in which business is transacted there. Even publications designed for this express purpose, often entirely fail of its accomplishment. Yet, from articles properly adapted to this ! purpose, any person of ordinary intelligence can easily acquire correct ideas, not only of the customs of the Street, and the routine of the Stock Exchange, but of the causes which influence prices and determine the great fluctuations of the market. ; No one should suppose, however, that a novico in these matters can ■ read financial articles as carelessly and hastily as general news, and at the same time fully understand’ them. The subject requires some care ; on the part of the reader, and it is worth all that it requires. It never I lacks interest to those who have become familiar with it, and it often I proves to be of the greatest practical value. A careful perusal of these pages cannot fail to interest and instruct all persons desirous of be- | coming familiar with the great subject of Stock Speculation. ‘ L. W. HAMILTON & CO. > 3 : L. W. HAMILTON & CO., STOCK BROKERS, q The New York Stock Exchange. The large and beautiful building in which the brokers of Wall Street daily assemble, and which is known as the Stock Exchange, is the centre of some of the most important influences which affect the financial and mercantile affairs of the country. The echoes of the bids and offers that are daily shouted in its halls, are heard in every city and town in the Union ; and many a resident from Maine to Cali- fornia waits eagerly for the telegraph to inform him of the profits or the losses which each day shows him, in his transactions in stocks. Even on the other side of the Atlantic, many a wealthy investor is oc- cupied in watching the dealings at the New York Stock Exchange as daily reported by the cable ; and the aggregate gains or losses that are often made in one hour within the walls of that famous structure, would be sufficient to make a poor man a prince or to reduce a prince to beg- gary. The Stock Exchange is a costly building, having two handsome fronts, one on Wall Street and the other on Broad Street. There is also a third entrance on New Street. The most interesting parts of the building are, perhaps, the spacious and elegant Hall in which the brokers daily assemble, and the vaults beneath it, where are deposited the vast amount of Bonds and Stocks dealt in at the Exchange. The number of members of the Stock Exchange is over eleven hundred, but all are not actively engaged in business. The value of a members seat is between five and six thousand dollars. The Stock Exchange, with its enormous daily transactions, affords to institutions and private investors a regular market for buying and sell- ing securities. It gives at all times to their bonds and stocks a definite price, at which they can be turned into money at a moments notice j everydays newspaper tells them the exact cash value of their secunties, and they are as sure of it as if they held the amount in money. But if there were no great centre of exchange, they would never know how much they were worth ; the sale of their securities would often involve delay, embarrassment and uncertainty, and the actual value of their investments would be greatly diminished from the fact that they were not readily convertible into money. The Stock Exchange has come into existence and assumed its present importance because it is a necessity to the country. Its activity and life represents the vital- ity and growth of the nation^s material interests, and so it will continue to be while the national prosperity lasts, and capital and enterprise have active work to perform. r) 4 L. W. HAMILTON & CO., STOCK BROKERS. Business Honor at the Exchange. There is no class of men in the country that preserve stricter rules in their dealings than the members of the New York Stock Exchange. The regulations of the Board are such that their accounts must be square with everybody. If a member were detected in a fraud upon his customers, or failed to fulfill his contracts, his seat would be for- feited and sold for the benefit of his creditors. So long as he occupies a seat in the Board he must be financially sound, and his transactions must be free from all irregularity. All certificates of stock, buyers’ or sellers’ options. Stock Privileges and all other contracts, to be a good delivery, must be signed or endorsed by a member of the Board. As a membership is worth $5,000 and upwards, the cost varying at different times, independent of its value to the broker as a means of carrying on his business, the inducement to preserve it is a strong one. But, besides this, the members are not often men of such character as to cheat those who deal with them. They feel a certain pride in the strict principles on which the business of the street is carried on, and desire to keep up the reputation of the Board. False reports, sensational rumors, forged telegrams and letters, and such other illegitimate means as are sometimes used to produce mo- mentary changes in the market, do not originate with the brokers of the Exchange, but with outside parties, who hang about endeavoring to make an occasional profit by these expedients. It was among members of the Board that the law to punish the circulation of false news, enacted by the last Legislature, was planned, and it was passed through their influence. As to the great combinations which have sometimes been formed to* I carry particular stocks upward or downward in the scale, there are dif- j ferent opinions as to their fairness, but as a general rule, they are ap- proved of by the lucky parties and condemned by the others. Their plans always involve risk to the schemers, and often come to a very different end from that set down in the programme. The capitalists ! who make such attempts to control the market are generally not I brokers. I A stranger visiting the Stock Exchange, during an active market, j would suppose that the scene before him was one of such confusion and j excitement, that fairness, order and business accuracy, could not, by I any possibility, be brought out of it. But, notwithstanding the vast number of transactions, and the wonderful rapidity with which they are effected,_ there are very few mistakes or disputes. There can be no No. lO WALL STREET, NEW YORK. 5 better proof of the exactness and completeness of the system pursued than the daily accomplishment without misunderstanding of this great mass of business, involving such enormous values. In dealing at the Exchange through a broker, one has, therefore, better security for fair treatment than in transactions of almost any kind, in the fact that his agent belongs to an organization governed by the most stringent rules, which it has ample power to enforce. The fact of his membership is also proof that his business record is clear, as the Board is very exclusive, three adverse votes preventing the admis- sion of any applicant. Brokers and their Customers. It is almost necessarily the wish of a broker that those who buy and sell through his agency should be successful in their operations. Next to his own failure, the worst mishap that can occur to any business man is the failure of his customers, as their prosperity is the essence of his thrift. The Wall Street broker knows that if his customer makes hand- some profits, both his ability and his inclination to extend his opera- tions will be increased, and that his success will very probably induce others, to whom he will tell it, to come into the same office. Men seem to feel a peculiar pleasure in gains made in speculative operations, and very few make a secret of them. It is, therefore, always probable that the broker will take the best care he can of the interests of those who entrust him with their orders^ If they ask his opinion he will give it honestly, and in some cases, if he sees inexperienced parties taking steps which are evidently mistaken ones, he will offer them information or advice which will prevent an unnecessary loss. He is prepared to answer questions and furnish reliable statistics regarding the standing of any incorporated company, and the value of its shares and bonds j he will also keep his customers posted on the current topics of the street, and any new movement at the Exchange. As the broker and the customer have in reality a common interest, the experience of the former and his knowledge of all the details of the market, are safely available for new operators as w'ell as for those who have themselves become familiar with the Exchange and its ways. It will not be his fault if his customer meets with losses through inexpe- dient or unlucky transactions 5 and when the operator’s affairs turn out favorably, and his profits roll up to handsome sums, the result will afford satisfaction to his broker as well as to himself. 6 L. W. HAMILTON & CO., STOCK BROKERS. Taking a Flyer, There are a class of men who are not ordinarily seen in Wall Street but are fond of watching the market from a distance, and making ven- tures at considerable intervals, improving such opportunities as they think particularly favorable whenever they arise. You will find some sagacious old bank president, or country capitalist, sitting down before his comfortable fire every evening in the year reading his favorite Wall Street journal, with a mind quite undisturbed by the fluctuations of stocks, until there appear signs of some change of great importance. The market, perhaps, has been in a state of depression and dullness through a summer season, and is at last beginning to show new activity and life j orders are coming to the brokers from all quarters ; the volume of business at the Stock Exchange is rapidly increasing, and evidently mustering for a grand campaign. Then our wary capitalist re^s every word of the news with the closest attention ,* he carefully selects the stocks that he will purchase, and sends a telegram and check to his trusted broker in the city. The movement in the market goes on ; prices rise 10 or 20 per cent, within a month j Wall Street is full of excitement, when the broker receives an order to sell the stocks bought for the country capitalist, and having done so, credits him with a large profit. The rural mansion perhaps shows a new Brussels car- pet on the parlor floor, and the young lady of the house sits down to play the new Steinway piano, on which her heart has been for some time set j while the glowing countenance of the head of the family, as he presides at the generous Christmas dinner, illustrates the satisfactory f results that may come from taking a “ flyer ” in Wall Street. Or, to show ( the meaning of this popular phrase by another case, suppose a mer- I chant has collected a considerable amount of money from his customers ^ and finds the times too dull, and the immediate prospect of trade too f unfavorable to justify him in using the cash that he has in hand to make any large purchases of goods. He does not wish to let his money lie idle, and having perhaps occasionally made a little venture 1 in Wall Street, and so acquired some experience in stock transactions, f he again looks in that direction for a profitable w^ay of employing his i funds. At the same time other business men throughout the country I are in the same situation with himself ; money is accumulating in the I cities, and the banks are reporting immense deposits j speculators are I able to borrow large sums at low rates of interest, for the purchase of stocks, and a multitude of buyers are coming into the market, because f for the time being they can find no other kind of investment that pro- mises satisfactory return. No. lO WALL STREET, NEW YORK. 7 Under these circumstances, if the merchant makes his purchase with good judgment, he does the best thing possible in using his money to buy stock. The situation of affairs is such that an important advance is almost certain to take place, and when he has realized a handsome profit, he will be able to convert his funds into cash again, and he pre- pared to re-invest them in his regular business. Many of the most successful bankers, merchants and manufacturers in the country have been in the habit of employing their spare funds, from time to time, in taking flyers such as we have described. In fact, it is hardly pos- sible for any intelligent and enterprising business man, who knows any- thing of Wall Street affairs, and the ease with which large profits are frequently made, to resist the inducements to take them, which will sometimes be presented by his own circumstances and the general financial situation. The Wall Street Vocabulary. To fully comprehend the business of Wall Street, it is necessary that the terms and phrases used by brokers should be thoroughly understood. In the Stock Exchange such terms as Cash ^ ‘‘Kegular” Buyer 30’^ Seller 30” are constantly heard. They are phrases without which, or without some similar abbreviation of speech, a large stock market would be impossible. For the benefit of such of our readers as are not familiar with the meaning of these, and other phrases peculiar to Wall Street, we have prepared the following brief explanations : j Cash. — When stocks are sold for cash the seller must deliver them ? the same day they are sold, at or before 2.15 P. M. The purchaser is j also bound to receive and pay for them within this time. In stock i quotations C. is used as an abbreviation of cash, 1 Regular — When the buyer of stock receives and pays for it on I the day following that on which the sale is made, the transaction is | called regular ; this being the way in which sales are usually made, is ] always regarded as binding, when no special agreement has been mad© ! to the contrary. In all transactions the stock must be delivered ! before 2.15 P. M., as the purchaser is not obliged to receive it after j this hour. j Buyers^ and Sellers^ Options. — The mysterious characters, s 3, | B 3, s 15, B 30, and similar ones, often puzzle readers of the market | reports. They stand for Seller 3, Buyer 3, Seller 15, Buyer 30, and j indicate that the party selling or buying the stock reserves the privi- 8 L. W. HAMILTON & CO., STOCK BROKERS, lege of delivering or taking it, as the case may be, at any time witbin the number of days indicated by the figures. When stock is sold seller 3,” the seller can deliver it at once, or at any time within 3 days. When sold Buyer 3,” the buyer can require its delivery at once, or at any time vdthin three days. Three days options bear no interest ; beyond this time 6 per cent, interest is paid by the purchaser from the day of sale to the day of delivery. When an order to buy or sell is given, the first point necessary to know is, when the person wishes to receive or deliver the stock. It is apparent that where the seller vushes money immediately he sell Cash ; where he can get a higher price or cannot make a delivery of the stock until the next day he sells Begular ; where a longer time is required before he can make a delivery, he sells Seller 3, Seller 10, or Seller 30 j but if he can deliver the stock at any time, he sells Buyer 3, 10, or 30, as may be desired by the purchaser, and thereby gets a better price, as the buyer is willing to pay a trifle more for the stock, for the advantage of taking it at any time he pleases. Maegixs. — A sum of money deposited by a person speculating in stocks with a broker, to secure the latter against loss on funds advanced by him to assist his customer in his speculations. The amount usually required by brokers as a margin on which to buy or sell stocks is 10 per cent, of their par value, amounting to $1,000 on one hundred shares. CARRYrs'G Stocks. — When a broker is holding stock for a customer, retaining it in his own possession until ordered to sell, he is said to be carrying the stock for his customers account. As by far the greater part of the money used in stock speculation is furnished by the broker, it is necessary for him to retain the stock in his possession as security for the money advanced. Long and Short. — When a party has purchased stock and is holding it for higher prices he is said to be long of the stock he is holding. When he has sold stock which he does not at the time possess, for future delivery, expecting to be able to purchase it at a lower figure, he is said to be short of the stock. For example, suppose a party thinking Pacific Mail will advance, buys 100 shares, and at the same time expecting a decline in Western Union, he sells 100 shares for future delivery, we should say he was long of Pacific Mail, and short of Western Union.” Borrowing Stock. — When a party has sold stock short in the reg- ular way he must borrow it of some one who has it, in order to deliver it to the purchaser. This can usually be done by depositing the money No. lO WALL STREET, NEW YORK. 9 received for the stock, with the party of whom it is borrowed, as a guarantee that the stock will be returned to the lender when called for. No interest is charged on short sales, as the broker uses the money re- ceived for the stock, to deposit with the party of whom he borrows it. Bulls axd Bears. — A speculator wdio buys stocks for an advance, in the expectation of higher prices, is called a hull^ but if he sells stocks short, expecting to make a profit on a decline, he is called a hear. The origin of these phrases, like all other broken metaphors, is probably due to a pungent conception of facts. If a bear finds any- thing in his travels, whether it be a turkey on a roost, or a man on a 'tree, he lifts his paw and pulls it down. The bull, on the contrary, lowers his head only to give men and things a decided upward movement. The application of these terms to stock speculators is too obvious to need explanation. Bull operators take a stock at its lowest price, and attempt to toss it up to as high a figure as possible ; hear operators, on the other hand, prefer to pull values down to the lowest possible figure. Believing that prices are too high, the hear sells for future delivery, and is said to be short of the stock ] the bull buys, confident that pri- ces will be higher, and is said to be long, possibly because this word is the opposite of short, or suggestive of the length of his purse. Into these two classes all the speculators, who are the life of Wall Street are divided ; the hulls of to-day are hears to-morrow. There are men who constitutionally hopeful — always looking for a rise ; and others w'ho equally disbelieve everything, and invariably go short of stocks in their operations. The large majority, however, alternate from hull to hear, and from hear to hull, occording to the speculative outlook. Pool. — A combination of speculators, formed for the purpose of buying up any particular stock, and thereby advancing the price. Corner. — When a stock has passed into the hands of a Pool, and the hears having sold largely for future delivery, are short of the stock, the members of the pool can, of course, make them pay any price they choose for the stock they have agreed to deliver. A large advance in the price is the result and there is said to be a corner in the stock. Abbreviations. — The letter x or ex-div, are used to show that a stock is sold without the dividend, which is about to be paid, and that it re- mains, in that case, in the hands of the seller j G, for guaranteed ; Cons, for consolidated j and Pf. for preferred stock, or stock which has precedence of the ordinary shares of the corporation issuing it, with respect to the payment of dividends, none being allowed on the com- mon stock until a certain percentage has been paid on the preferred. lO L. W. HAMILTON & CO., STOCK BROKERS, I A Put Contract. I A Contract giving the holder the privilege of selling to the party I signing it, a certain number of shares, of any particular stock, within a ; definite time, at a stipulated price, is called a Put. The party selling a Put agrees in the contract to purchase from the holder the stock named, ! at a stated price, which is usually from 1 to 2 per cent below the mar- ! ket price, at the time the contract is signed. This per cent, below the I marketplace at which a Put is drawn is called the distance from the market, and is regulated by the activity of the stock, and the demand for the contracts. The time for which a Put contract is usually drawn is thirty days, although they can be made for a longer or shorter time if desired. The cost of a thirty-day Put is one per cent, of the par value of the stock, amounting to 8100 on one hundred shares. The brokers com- mission for buying a Put is $6.25, making the entire cost, including the commission, $106.25. The following is a copy of a Put on onC hundred shares of Erie, the market price being 32, and the distance 2 per cent. New York^ 187 For value received^ the hearer may deliver to the undersigned one hundred shares of the stock of the Erie Bailway Company ^ at thirty per cent, of its par value, at any time tvithin thirty days from this date. The undersigned is entitled to all regular, or extra, dividends declared during this time. Expires 187 S igned When a Put is held on a stock that has declined in price, the holder will on the day it expires, or before if the fall in price has been suffi- cient to show a good profit, buy the stock at the market price, and de- liver it to the party of whom the Put was purchased, at the higher price named in the contract. The difiTerence between the price at which the stock is bought, and the price at which it is delivered, is the profit made on the transaction, less the cost of the Put and the brokers commission. The buying of the stock, and settling the contract is usually done by the broker through whom the Put was purchased. The money necessary to buy the stock is furnished by the broker, who charges a commission of $12.50, one one hundred shares for doing the business. That the reader may more fully understand this operation, let it be supposed that within the thirty days Erie declines to 20, and the holder of the Put orders his broker to buy one hundred shares and settle the contract. The broker buys the stock at 20, paying $2,000. No. lO WALL STREET, NEW YORK. 11 for it, and delivers it to the party of whom the Put was purchased at 30, the contract price, receiving for the one hundred shares the sum of $3,000, and renders the following statement of the transaction, show- ing a net profit to the holder of the Put of SSSl. 25, on an investment of only $106.25, with no risk of a greater loss. New Yonk 187 M In account with L. W. HAMILTON & CO. Dr. To Put on 100 shares Erie at 32 $100 00 “ Broker’s commission per cent 6 25 100 shares Erie, bought at 20 2,000 00 “ Commission for buying stock, ^ per cent 12 50 “ Balance to credit 987 50 Cr. By Cash paid for Put and commission $106.25 “ 100 shares Erie delivered to seller of Put at 30 3,000 00 $3,106.25 From balance to credit $987 50 Deduct amount paid for Put and commission 106 25 And net profit on the operation is $881.25 Should the price of Erie advance, instead of decline, and remain at or above 30 during the time for which the Put was drawn, the holder would not buy it, but would let the contract expire without delivering the stock. In this case the loss would be only $106.25, the cost of the contract. But should the market price of the stock be at any point below 30 on the day it expired, the holder *of the Put would buy one hundred shares, and deliver it to the party who signed the contract, realizing the difference between the price at which the stock was bought, and 30 the contract price. If the stock was bought at 29, the amount realized would be $100, or the exact cost of the Put, and the loss would be simply the broker’s commissions, amounting to $18.75. If the stock was bought at 28, $200 would be realized, or a net profit of $81.25. A Put is exactly the reverse of a Call, and should be purchased on a stock that is likely to decline in price. Whenever a panic occurs in the stock market, the holders of Put Contracts always make large profits. Many shrewd speculators make a practice of buying Puts on any stock that has advanced rapidly, in anticipation of a decline, it being well understood that a fall almost invariably follows a sudden rise. 12 L. W. HAMILTON & CO., STOCK BROKERS. How a Put is Used as a Margin. It is necessary for the safety of a broker, when he purchases and holds stock for a customer, that the latter should deposit a sum sufficient to ensure him against loss in case the stock should decline in value before it was sold. This deposit, or margin, as it is termed, was for- merly 10 ten per cent, of the par value of the stock, amounting to $1,000 on one hundred shares. Instead of this plan, that of using a much smaller sum, together with a Put, is now employed to a very large extent and with much greater safety to the speculator. A Put being a contract, signed by some responsible party, to take the stock at a figure one or two per cent, below the price at which it was bought, the broker has a guarantee that the possible loss on the stock is limited to one or two hundred dollars. For this reason the broker will only require a cash margin equal to the difference between the price at which the stock is bought, and the price at which the signer of the Put agrees to take it. By this method the losses of the speculator are limited to compari- tively small sums ; while, if the market rises, in accordance with his expectations when the purchase was made, his profits will be nearly as large as under the old system, the only additional expense being the cost of the Put. Should the price of a stock decline to the contract price of the Put before it was purchased, a broker would require no cash margin to be deposited, the Put being sufficient security to carry the stock. Stock can always be bought against a Put without any cash margin, when the market price of the stock is at, or below, the contract price of the Put. But when the market price of the stock is above the price named in the contract, a sum equal to the difference is required. For ex- ample : — A Put on Pacific Mail at 40 would be good security for a broker to buy the stock, if he could get it at that figure ; but if the price was 41, a deposit of $100 would be required, if 42, $200. Many speculators buy Puts, but do not buy the stock until the price has declined to a figure at or below the Put price. Should the stock be bought below the Put price, a profit is certain, as the stock can be delivered to the party who signed the Put at a figure above the cost of it. In operations of this kind the speculator is required to deposit a sum sufficient to cover commission and interest charges, $50 on one hun- dred shares, being the usual amount required. To illustrate this method of operating we will suppose that when Union Pacific was No. lO WALL STREET, NEW YORK. 13 selling at 50, a party, thinking the price would advance, buys a Put on one hundred shares at per cent below the market, and at the same time buys the stock at 50. The cost of the Put would be $100, the cash margin required $150, and the $50 for interest and commissions would make a total of $300, that the broker would require for the operation. Before the Put expires. Union Pacific sells at 70, and the broker, receiving an order from his customer, sells at that price, and makes the following statement of the transaction : New York, 187 M In account with L. W. HAMILTON & CO. Dr. To Put on 100 shares Union Pacific at 48^ $100 00 “ Commission for buying the same 6 25 100 shares Union Pacific at 50 5,000 00 “ Commission buying stock 12 50 “ “ selling stock 12 50 Interest on stock 30 days 29 16 Balance to credit 2,139 59 $7,300 00 Cr. By cash paid for Put $100 00 ** “ deposited for margin 150 00 ** “ “ for com. and interest 50 00 ** 100 shares Union Pacific, sold at 70 7,000 00 $7,300 00 From balance to credit, $2,139.59, deduct $300 deposited with the broker, and the net profit on the transaction is $1,839.59. One advantage of this method of operating is, that stock can be bought and held until the Put expires without risking the loss of over $300. The extent of the loss in an operation of this kind is reached when the stock falls to the Put price, which in this case was 482 , and remains at or below that figure until the Put expires. No greater loss is made by this method, when the stock falls 10 per cent, than when it falls H per cent., as the seller of the Put contracts to take the stock at Ih per cent, below the price at which it was bought, without regard to the market price, at the time the stock is delivered to him. The specu- lator is in this way ensured against only a limited loss, without placing any limits to his profits. 14 L. W. HAMILTON & CO., STOCK BROKERS. A Call Contract. A contract for the futnre delivery of stock is termed a Call, and gives the holder the privilege of purchasing of the party with whom the contract is made, a certain number of shares of the stock named, within a definite time, at a stipulated price j or in other words, the party who sells a Call agrees to deliver to the purchaser, if called for, the stock named at the contract price, which is usually from to 3 per cent, above the market price of the stock at the time the contract is signed. This per cent, is called the distance from the market, and is governed by the activity of the stock and the demand for contracts. At a time when the market is very active and stocks are rapidly ad- vancing, the distance is always greater than w’hen the market is dull, or when prices are on the decline. The purchaser of a Call is not obliged to take the stock, and will not do so unless the price advances above the contract price. In case the price of the stock remains at or below the contract price, until the expiration of the time for which it was given, the purchaser of the Call W’iil lose only the amount paid for it, w'kich is, including broker^s com- mission for pm'chasing, $106.25 on one hundred shares. But should the stock advance above the contract price, the holder of the Call will receive the difference between that, and the market price. An advance of 1 per cent, would be $100 on one hundred shares; an advance of 10 per cent, would be $1,000. "While the risk of loss to the purchaser of a Call is limited to the sum paid for it, the amount of profit that may be realized is unlimited. A Call is exactly the reverse of a Put and should be purchased on stocks that are most likely to advance in price. The cost of a Thirty-day Call is 1 per cent, of the par value of the stock, amounting to $100 on one hundred shares, and in the same pro- portion for a longer or shorter time. The broker^s commission for buying a Call is l-16th of one per cent., amounting to $6.25 on one hundred shares. The following is a copy of a Call on 100 shares of Union Pacific, the market price being 47, and the distance 3 per cent. New" York, 1S7 For value received, the hearer may Calx on the undersigned for One Hundred shares of the stock of the Union Pacific Railroad Company, at Fifty per cent, of its par value, at ayiy time within Thirty Bays from this date. The Holder of this Contract is entitled to all regular, or extra, dividends declared during this time. Expires 1S7 . Signed No. lO WALL STREET, NEW YORK. IS The holder of a Call on a stock that has advanced will on the day it expires, or before if the price has advanced sufficiently to show a good profit, call for the stock at the contract price, and sell it at the market price, the difference being the profit on the transaction, less the cost of the Call and the broker’s commission. Calling for the stock and selling it is termed closing the contract, and is usually done by the broker through whom the Call was purchased. The broker will always furnish the money to pay for the stock, and for doing this and for selling the stock will charge a commission of $12.50 on one hundred shares. Should Union Pacific advance to 72 within the thirty days, and the broker be instructed to close the contract, he would call on the party who signed the contract, for the stock at 50, paying $5,000 for the 100 shares, and immediately sell it at 72, receiving for it the sum of $72,000. The following is a copy of the statement that would be rendered by the broker, showing a net profit of $2,081.25 on an investment of only $106.25, with no risk of a greater loss : New York, 187 M In account with L. W. HAMILTON & CO. Dr. To Call on 100 shares Union Pacific at 50 $100 00 “ Broker’s commission for buying Call 6 25 100 shares Union Pacific, called at 50 5,000 00 “ Commission for selling the same -....f.... 12 50 ** Balance to credit 2,187 50 $7,306 25 Cr. By cash paid for Call and commission $106 25 “ 100 shares Union Pacific sold at 72 7,200 00 $7,306 25 From balance to credit $2,187 50 Deduct amount paid for Call and commission 106.25 And the net profit on the Call is $2,081 25 It is not often that a stock advances enough during thirty days to pay as large a profit as this, but a profit of from $500 to $1,000 is fre- quently realized on 100 shares. Parties buying Calls incur no liability of loss beyond the amount paid them, and no money is required from the speculator to pay for the stock when the contract is settled. The money to buy the stock is ad- vanced by the broker, who will, after selling it, pay to his customer the profit on the transaction. 16 L. W. HAMILTON & CO., STOCK BROKERS. How a Call is Used as a Margin. A great majority of operators, when coming into Wall Street for tho first time, make their plans wfith reference to the profits to be derived from upward movements in stocks, paying no attention to the fact that a decline in the market can be made a source of qiiite as large gains as an advance, by thpse who are able to foresee and improve it. But as speculators become familiar wdth the w^hole system of Wall Street speculation, they cease to confine themselves to speculating for a rise, and not only buy when they anticipate an advance, but sell stocks short or for future delivery, -when there are indications of a decline. For example, if a party thought Lake Shore w^as likely to fall, when it was selling at 83, he might order his broker to sell 100 shares short, or for future delivery, without having the stock in his possession when the order was given. If the broker sold the stock in the regular way, he would borrow the stock for delivery, from some one who had it on hand, depositing with them as security the money received from the sale of it. Or, he might sell the stock Seller 30,” which wmuld give him 30 days in which to delivering it. Having thus sold 100 shares, and borrowed the stock for delivery, or contracted to deliver it within 30 days, he would buy the stock when it had declined to a point where a good profit could be realized. If it declined to 75, and he bought at that price, he would pay $7,500 for 100 shares, and either return the stock, if he Imd borrowed it, or deliver it if he sold it Seller 30,” and receive $8,300, the price at which it was sold. The profits on the transaction would be $800, less the broker’s commission for selling and buying the stock. But the broker in making the sale or contract for future delivery at 83, (for the fulfilment of which he must himself become responsible,) could not be sure that the stock would not rise, instead of fall, as his customer expected ; and in that case, if not secured in some way by his customer, he would suffer a loss. Suppose that Lake Shore advanced to 90, and the party of whom it was borrowed called for the stock, it would be necessary for the broker to pay 90 for it, in order to return the stock he had borrowed, and the loss would be $700. Or, suppose he sold it for delivery any time within 30 days, and at the expiration of the time Lake Shore sold at 90, he would be obliged to pay that price for it, in order to fulfil his agreement with the party to whom he sold it j in either case the loss would be $700. The broker, therefore, requires some security to protect himself against this loss. This security was fonnerly given by the speculator No. lO WALL STREET, NEW YORK. 17 depositing with the broker $1,000 on every 100 shares sold, but since the system of operating with Privileges has been introduced, a Call on the stock is deposited with the broker, together with the difference be- tween the contract price and the price at which the stock is sold. In this case we are supposing that some responsible party w^ho owned 100 shares of Lake Shore would sell a Call on it at 2 per cent, above the market price, or in other words, would agree to sell the stock, if called for within 30 days, at 85 ; for this contract he would be paid $100. The speculator would place this contract, with $200, in cash, in the hands of his broker, who could then execute the order to sell short without risk to himself. To show this, we will suppose as before, that Lake Shore advanced to 90. The broker would demand the stock from the party who sold the Call at 85, paying for 100 shares, $8,500, and deliver the same to the party to whom it was sold at 83, receiving for it $8,300. The difference of $200 would be covered by the money deposited by his customer, and he would lose nothing. The customer would lose, in consequence of his miscalculation of the course of the market, only the $200 deposited, with $131.25 expended for the Call and broker^s commissions, in all $331.25. But if the judgment of the speculator proves to have been correct, and the stock declines, as we at first supposed, to 75, the sum of $800, which we found to represent his gross profits, would be reduced only $106.25, the amount paid for the Call, and commission for buying. It will be seen by this illustration that a Call can be used as a margin for selling stocks short with the same advantage as is afforded by a Put in buying for an advance. A Straddle. A Double Privilege drawn at the market price of the stock is called a Straddle. The cost of a Straddle is from 3 to 4^ per cent., or from $300 to $450, for a contract on one hundred shares. The only differ- ence between a Straddle and a Spread is, that one is made at the market price of the stocks, the other at a distance from the market. A Straddle is a contract drawn in the same form as a Spread, and gives the holder the privilege of calling for the stock at a fixed price, or of delivering it at the same price to the party who signs the contract. A Straddle is desirable when a party wishes to buy and sell stocks, with- out being obliged to deposit a cash margin. The brokePs commission for buying a Straddle is $12.50, on one hundred shares, the same as on a Spread. 18 L. W. HAMILTON & CO., STOCK BROKERS, A Spread Contract. A Contract giving the holders the privilege either of buying or sell- ing a certain number of shares of any particular stock, at a stipulated price, within a definite time, is called a Spread, and is equivalent to a Put and Call on the same stock. From this fact it is sometimes called a Double Privilege. It is drawn at from 1 to 2^ per cent, below and the same distance above the market price of the stock at the time the contract is signed. The cost of a Spread for thirty days is 2 per cent, of the par value of the stock, amounting to $200 on one hundred shares. The broker^s commission for buying a Spread is one-eighth of one per cent., amounting to $12.50 on one hundred shares, making the entire cost of a thirty-day Spread on 100 shares $212.50. The following is a copy of a Spread on 100 shares of Lake Shore, the market price of the stock being 62, and the distance 2 per cent. : New York:, 187 . For value received, the hearer may Call on the undersigned for one hundred shares of the stock of the Lake Shore Railway Company at sixty- four per cent, of its par value, at any time within thirty days from this date. Or, the hearer may, at his option, deliver the same to the under- signed at sixty per cent, of its par value, at any tune tcithin the period named. All regular or extra dividends declared during this time are, in either case, to go u'ith the stock, and this contract is to he surrendered upon the stock being either called or delivered. Expires 187 . Signed The holder of a Put makes a profit only when the stock declines ; the holder of a Call only when it advances. But the holder of a Spread realizes a profit when the stock either rises above, or falls below the contract price, and loses only w’hen the market is very inactive, with but slight fluctuations for the entire thirty days. Should Lake Shore advance to 70 at any time within the thirty days, the holder could order his broker to settle it, which would be done by calling, on the party of w’hom the contract was purchased, for the stock at 64, and selling it at 70, the market price, the same as in the settlement of a Call. The proceeds realized w’ould be $600, and the net profit $375, the cost of the Spread and the broker’s commissions being $225. No. lO WALL STREET, NEW YORK. 19 Should Lake Shore fall to 54, and the broker receive orders to close it, he would buy the stock at that figure, paying $5,400 for it, and deliver it to the party of whom the Spread was purchased at 60, the contract price, the same as he would settle a Put, realizing the same profit that he would, had the stock advanced to 70. The commission for closing a Spread is $12.50 on one hundred shares, the same as for a Put or Call. Distance and Settlement of Privileges. The price paid for Puts, Calls, or Spreads, is always the same, being 1 per cent., or $100 for a Put or Call contract, and 2 per cent., or $200 for a Spread contract on one hundred shares of stock. But the rate, or as it is usually termed, the distance from the market at which they are drawn, is variable, ranging from 1 to 3^ per cent. A very active mar- ket, with wide fluctuations, increases the demand for Privileges, and the distance will be advanced in obedience to the well known law of supply and demand, while a dull market, with narrow fluctuations, will . cause sellers to offer them at a much smaller distance Lorn the market. Some particular stock may advance rapidly with good prospects of a further rise, like Union Pacific in April, 1875, when an advance of over 25 per cent, took place within a month, and the demand for Calls will be so great that sellers can advance the distance to a higher figure, with- out decreasing the sales. It is usually the best time to buy Privilege Contracts when the dis- tance from the market is the greatest, as it will always be found that the market is corresponding!}^ active, and the chances for a large profit much better than on contracts bought at a small distance when the market is dull and inactive. In buying Contracts, much depends on the judgment of the broker in securing them at the most favorable time. It is for this and other reasons that brokers should never sell their own Contracts to their customers, as they would then be interested against their customers. Whenever in an active market a broker assumes to give the distance from the market for the future, it is safe to say that he proposes to sell his own Contracts to his customer, instead of buying them in the regular way at the Exchange, as it is just as impossible for him to say at what distance he can buy a Contract to-morrow, as it is for him to foretell the future price of the stock. The safest course for speculators to pursue is to place their orders in the hands of a thoroughly responsible broker, and trust to his judgment and discretion in securing a Privilege at a time when the market is m 20 L. W. HAMILTON & CO., STOCK BROKERS. most favorable, both in price and distance. When reporting the pur- chase of a Privilege, brokers should always state the market price of the stock, distance from the market, and the hour of the day when the contract was purchased. WHEN STOCK PRIVILEGES SHOULD BE SETTLED. Many speculators make losses in operating with Stock Privileges by not instructing their broker to settle the contract at the proper time, when, if the right order had been given, instead of a loss, a profit would have been realized. To secure our customers a profit of 100 per cent, when it has once been made, without losing the chance of realizing a much larger profit, should the price of the stock move steadily in favor of the contract, we have prepared a blank form of a STOP ORDER to be used by our customers in giving the necessary in- structions to settle a Privilege at the proper time, which will be mailed free on application. Whenever a profit can be made equal to the cost of the Privilege, it is always policy to secure it, and purchase another contract on the same stock, rather than let the market price re-act to a point where little or nothing can be made. By signing and returning to us the order, which is sent with all certificates of purchase, our customers can be assured that their contracts will be properly settled. Broker’s Commission. The following are the regular commissions charged by all members of the Stock Exchange for buying or selling Stocks and Stock Privi- leges : For buying or selling 100 shares of stock, per cent $12 50 For settling Stock Privileges on 100 shares, ^ per cent 12 50 For buying Spread or Straddle on 100 shares, ^ per cent 12 50 For buying Put or Call on 100 shares, per cent 6 50 The following is the cost of Thirty-day Privileges, including the brokers^ commission : A Put or Call on 10 shares $10.63 A Spread on 10 shares $21.25 A Put or Call on 25 shares $26.56 A Spread on 25 shares $53,13 A Put or Call on 50 shares $53.13 A Spread on 50 shares $106.25 A Put or Call on 100 shares $106.25 A Spread on 100 shares $212.50 ' ■< No. lO WALL STREET, NEW YORK. 21 Extensions and Renewals of Privileges. It will sometimes happen when a Stock Privilege has been held by the purchaser until the time of its expiration approaches, that the price of the stock will have moved nearly, but not quite enough to show a profit. Under these circumstances, the holder will naturally be reluc- tant to give up the contract and accept a loss, perhaps at the very time when a decided movement of the stock in his favor seems the strongest j and in order to relieve him from the necessity of doing so, the party who sold him the privilege will generally be willing to extend it for another thirty days for a less sum than was originally paid for it. The price paid for the second thirty days is usually $75 for Puts and Calls on 100 shares, or | per cent., and $150 for Spreads. On less than 100 shares the price paid for the extension is in the same propor- tion. When the price of the stock on the day the privilege expires is about the same figure that it was when the contract was purchased, it is always best to secure an extension if possible. When a speculator has purchased a Call and the price of the stock has fallen materially, in- stead of advancing as he expected it would, or a Put and the price has advanced, a renewal of the contract w^ould be more to his advantage. A renewal differs from an extension in the fact that a change in the contract price of the stock is made in the former, but not in the latter. Sometimes an extension should be obtained, and at other times a re- newal would be most desirable, according to the market price of the stock, as compared with the contract price of the privilege. The cost is the same and we will always secure for our customers, whichever is most desirable. To secure either an extension or a renewal of any privilege, it is necessary that we should receive an order for doing it, on or before the day it expires. Many parties make a handsome profit on the entire investment during the second thirty days, who otherwise would lose the first cost of the privilege. Should we receive an order to secure an extension or a renewal of a contract that could, on the day it expired, be settled at a profit, we should disregard the order, and settle the privilege instead. Cases of this kind often occur, by the market becoming very active on the day the contract expires. In no instance do we secure an extension or re- newal when it is not for the interest of our customer that we should do so, even though we may have an order from him to do it. The commission charged for securing an extension or renewal is the same as for jmaking the first purchase, being $6.25 for a Put or Call on one hundred shares of stock, and in the same proportion fora smaller number. 22 L. W. HAMILTON & CO., STOCK BROKERS, Why Stock Privileges are Sold. The question is often asked by persons who are unacquainted with "Wall Street affairs, what inducements there are for capitalists to sell Privileges. The persons by whom these contracts are made, they say, are generally among the most experienced and able men in the street ; and they express surprise that these parties should make agreements which would seemingly take money out of their own pockets as fast as they put it into the pockets of the holders of their contracts. It is just j ' here, however, that the fallacy lies j the truth being that there is a di- j j vision of profits between the seller and the buyer of the Privilege, i I neither of them taking his share from the resources of the other. The seller, in the conservative spirit which usually governs capitalists, is contented with a small margin of profit on each transaction, which he | ; receives in the shape of the sum paid for the contract, and the differ- I ence of one or two per cent, between the price of the stock at the time ; when the contract is made, and that which he agrees to receive or de- j liver it. I The buyer of the Prhfilege will have the profit arising from any ad- : vance or decline in the price of the stock, within the time and limits fixed ! in the contract, and his side of the transaction being more of a specula- ! tive character, his profits will often be very much larger than those of the seller of the Privilege. Suppose a capitalist to be holding stock in the expectation of an ad- I vance, intending to dispose of it and secure his profits after a rise of per cent. If he sells Calls at that distance above the market price, at the rate of 8100 for every 100 shares, he will add that sum to his gain of 8150 on every 100 shares held. The following figures will show the profits made by each party in such a transaction, letting A repre- sent the seller of a Call on Union Pacific, and B the purchaser, the price at the date of the contract being 30, and the Call being made at 31^. Received by A for Call on 100 shares SlOO 00 Received for 100 shares stock sold to B at 31^ 3,15<) 00 $3,250 00 Value of stock when Call is sold $3,000 00 Net profit to A, the seller, on the transaction 250 00 $3,250 00 In this case the party who sold the Call ret^ived 8100 for it, which added to the per cent, advance on the stock makes the net gain to the seller of the Call 8250. No. lO WALL STREET, NEW YORK. 23 If the price has advanced to 38, at the time when the stock is deliv- ered to B, his account, after selling the stock, will stand as follows : Keccived for 100 shares stock at 38 $3,800 00 Paid A for Call contract. $100 00 Broker’s commission, buying Call 6 *25 Paid A for 100 shares stock at 31^ 3,150 00 Broker’s commission, selling stock 12 50 Net profit to B, the buyer, on transaction 531 25 $3,800 00 On the same principle, if A should sell 100 shares shorty or for future delivery, by selling a Put on it, he would add $ 1 00 to his profits by the decline. Again, suppose the capitalist desires to obtain 100 shares at a price below that at which the stock is selling at the time. He sells a Put at 1 per cent distance from the market for $100, making himself secure of that sum in any case, and if the stock declines as he expects, he will get it at a price virtually 2 per cent, less than that which it commands at the time of issuing the contract. A Put is also frequently issued by a broker who has an order to buy a stock as soon as it shall have declined to a certain price. This, being an agreement on the part of his customer to take the stock at a given figure, is, to him, as good as a Put ; and he accordingly sells a Put against it without incurring any risk. When the stock falls to a point within 1 per cent of the price at which the order to buy has been given, he will negotiate the Privilege at that distance below the market. If it continues to decline and is delivered to him, he will turn it over to his customer without loss to himself; if it rises, and is therefore not ofiered to him by the buyer of the option, he will have nothing further to do in the transactions ; but in either case, he will evidently make the $100 paid as the price of the Put. Another reason for the sale of Privileges is the desire on the part of cliques and large operators to produce a favorable impression, or the opposite, with respect to any stocks which they happen to be attempt- ing to control. If they wish to sustain the price of a stock, they will sell Puts on it at a very small distance from the ruling price at the ''time; if they wish to depress it, they will sell Calls on it in the same \ way. While the manceuvres of cliques are often ruinous to themselves ' and to hundreds of others, they always afford great advantages to those who operate by means of Privileges. These result partly from the wide fiuctuations occasioned by their movements, and partly from the very favorable terms on which they sell Puts and Calls. When there I 24 L. W. HAMILTON & CO., STOCK BROKERS. are two contending cliqnes in a stock, each selling options veiy close to the market, and on opposite sides of it, the Purchaser of a Put and a Call is almost certain of a handsome profit. The foundation of the business of selling Privileges is capital. Men of very small means may enter the field of speculation as purchasers of Privileges, but those who sell them are parties known to be financially strong, sound ond reliable. The inducements for capitalists to sell Double Privileges are more complex in their character than those which lead them to sell Puts and Calls, but essentially of the same nature. The seller of a Double Privilege must have the funds in hand to take the stock and pay the stipulated price for it, if it declines and is put or offered to him for acceptance, in accordance with the terms of the contract j and he must also either have in his possession such an amount of the stock itself as he has agreed to deliver, or keep in readi- ness the funds to step into the market and buy it at a moment’s notice, so as to be prepared to deliver it to the holder of the Privilege in case it rises and is called. For instance, the seller of a Double Privilege on Xew York Central at 1 per cent, distance from the market price, which we will assume to be 104, agrees in the contract either to take the stock at 103, or to de- liver it at 105. He therefore keeps the sum of $10,300 at command, so as to take the stock if put to him at 103, and also buys 100 shares of New lork Central at the market price, and keeps it in his safe ready to be delivered if called from him at 105. If the price rises and the stock is called, his profits will evidentlv be secure. He will have the benefit of the advance in value of the 100 shares held, from 104 to 105, amounting to $100, besides the $200 paid him for the Privilege. On the other hand, if the stock falls and is put to him, the net cost of the 200 shares which he will then hold will be only 102^ j the 100 shares which he purchased at the outset having cost $10,400; the 100 shares delivered to him on the contract costing him $10,300 ; and the sum total of $20,700 being reduced, by the $200 received as the price of the contract, $20,500, or $10,250 for each amount of 100 shares. It will be seen that the seller of the Privilege, in the case just taken, is sure of either making a clear profit of $300, or of getting 200 shares of New York Central at a figure 1^ percent, below the market price at the time when the contract is made. Like the party to whom he sells the Privilege, he has two strings to his bow, and is secure of a material advantage, though not certainly knowing which way the market will turn. No. lO WALL STREET, NEW YORK. 26 If the maker of the Privilege does not wish, however, to be bur- dened with 100 shares in addition to those originally held, he will easily avoid it by selling short when the price declines to 103. That is, he will sell 100 shares at that price for future delivery, and when the stock is put to him by the holder of the Privilege, he will take it at 103, and at once turn it over, at the same price, to the party to whom he has sold. In this way he will avoid increasing the amount of stock on his hands, and the $200 received for the Privilege, will still go to diminish the net cost of the 100 shares originally held. As the sellers of Privileges are commonly men of judgment and ex- perience in financial affairs, they are governed by their views of the general situation of the market, at different times, in making their con- tracts and in their mode of preparing to meet them. As a rule, they perhaps retain the stock put to them on a declining market, and hold it for an advance, They thus make sure of buying at low prices on an average, besides having the sums paid them for their contracts to reduce their net outlay still further. The sale of Privileges, properly conducted, cannot be regarded as a speculative business, but affords sure, though not extravagant returns. It is to the Purchaser of Privi- leges that the possibility of large profits on single transactions is re- served, notwithstanding the comparatively trifling amount of capital which his operations require. It is not an unusual occuiTence that a Put or Call on 100 shares is settled at a profit of two or three thousand dollars, and on sixty-day contracts the profit is often much greater. As both the sellers and the buyers of Privileges may be gainers, it it will perhaps be asked, whether all parties operating in Wall Street can make money at the same time. The idea which prevails in tne mind of the public is, that the street is somewhat like a great gambling establishment, where anything that is gained by one individual must be lost by some other. The fact is, however, that there are times when almost all operators in stocks are doing well. When money is flowing freely from other forms of investment into the shares sold at the Ex- change, and the whole market is rising, all but the few w'ho attempt to resist the tide by selling short will be growing richer. Yet it is perfectly true that a large proportion of the profits made by the sellers and buyers of Privileges, represents the losses of other parties ; and these are the reckless or inexperienced speculators who adhere to the dangerous system of buying on cash margins. Thus it is that prudent men in the end take precedence of mere thoughtless ad- venturers in Wall Street, as w’ell as in every other sphere of business activity. 26 L. W. HAMILTON & CO., STOCK BROKERS. Brokers and Speculators. The business of a broker, whether in stocks, cotton, grain, or any other article of merchandize, cannot, on sound principles, be united with that of a speculator, or with that of carrying on ordinary trade for his own account. The broker must be an active and wide-awake man in the market, carefully gathering all information that may be of value to buyers and sellers ; but his object should be to obtain this informa- tion for the benefit of his customers, and not directly for his own use. His activity, intelligence, and acquaintance with the business, are in fact the very inducements which lead his customers to make him their agent in their transactions, and he is, therefore, bound to communicate to them fully whatever knowledge he may possess that may be of use to them. A broker who is known to speculate on his own account, soon loses the confidence of his customers, and finds their patronage decreasing. If he recommends the purchase of a certain stock, they will suspect that it is because he has it on his hands and desires to sell it, or to see the price strengthened by an increased demand j and if he advises them to sell, they will fear that he is short of the stock, and interested in producing a decline. The laws which govern the general business of brokerage apply with full force to the sale of Stock Privileges. A broker will some- times be asked, when recommending a Privilege on any particular stock as a good purchase, w’hy he does not buy it himself j his answer will be, that it is because he is a broker and not a speculator j that his business is one of absolute safety, giving steady and valuable returns, with which he chooses to remain satisfied, rather than to sacrifice them for the advantages to be derived from successful speculation. For reasons similar to those which should prevent a broker from pur- chasing Privileges for the purpose of speculating for himself, it is not best that he should issue or sell Privileges on his own account. The fact that the signature affixed to a Privilege is that of the broker who offers it for sale, is sufficient to produce doubt in the mind of a customer, as to the soundness of any ad\dce that he may give with ref- erence to its purchase. The proper business of the broker is to bring buyers and sellers together. Being constantly present in the market, and having daily interviews with the Capitalists and large Operators who issue Privi- leges, he is able to render indispensable aid to buyers of these con- tracts, and also to accommodate the parties who sell them by finding ready purchasers. No. lO WALL STREET, NEW YORK. 27 But by selling Privilege Contracts signed by himself, he must sacri- fice the interests of both the parties between whom he ought to act as a middleman. He interferes with the interests of the capitalists by whom Privileges are usually sold, by entering into competition with them in their own special line of business ; and he, of course, loses favor with them in consequence. They will prefer to deal with the broker who brings them all the custom that he can, and they will make their most favorable terms in their transactions with him. The broker who offers his own Privileges for sale also loses favor with buyers. The transactions, as between themselves and him, is one which involves confidence on their part. Being themselves in some measure unacquainted with the market, they require the assistance of a broker who is not only experienced and well informed, but entirely disinterested. But the broker who deals only in Privileges Issued by others, has the entire confidence of his customers, and will secure for them the best terms possible, as his popularity and success in business depends in a great measure on his doing so. His interest and theirs will per- fectly coincide, which will be a strong guarantee that their orders will be executed to the best advantage. The Routine of the Exchange, Every school-boy in the country has heard of the New York Stock Exchange. Every one knows that it is a scene of immense daily trans- actions in stocks ; that it is full of excitement and activity ; and that great fortunes are made and lost in it. But very few, outside of Wall Street, are acquainted with the details of the business which is carried on in it, or know anything of its daily routine. At 10 o’clock in the fore- noon the members of the Board begin to assemble in their hall, and at 10.30 all stocks dealt in at the Exchange are called in regular order by the Vice-President, and the bids and offers that are made for each of them in its order, are recorded on one of the large blackboards placed on each side of the President’s desk for this purpose. At 1 o’clock the second call of stocks takes place, and at 3 o’clock the hours of business end. Though large amounts of stock are sometimes sold in this way, yet the greater part of the sales are made at other times, whenever the orders from customers happen to be received by the brokers. Each active stock has some particular part of the hall assigned to it, where those who are dealing in it may be seen collected. As you look down 28 L. W. HAMILTON & CO., STOCK BROKERS, on the floor of the hall from the Visitors' Gallery, you see these groups in all parts of the room. The brokers are rapidly making bids and offers at the top of their yoices, raising their fingers in the air to em- phasize them j and the noise that proceeds from the whole assembly of oyer one thousand brokers is yery confusing to a stranger. But the^ mode in which the business is done is neyertheless, in fact, a perfect model for system and order, and it is seldom that a mistake occurs in the execution of an order. To illustrate the exact way in which stocks are bought and sold, let us suppose a speculator wishes to buy 100 shares of Union Pacific. He repairs to his brokers office, and writes his order to purchase that amount, or if at a distance from the city, he sends his order by tele- graph. The moment it is receiyed, a clerk or boy rushes away with it to the Stock Exchange, where it is deliyered to the member of the firm who is in attendance there at the time. He at once makes his way into the crowd,’^ where Union Pacific is being sold, and proceeds to bid for the stock, until he obtains it at the price named in the order, or at a lower one if he finds it possible to do so. A notice of the transaction is promptly sent to the customer, and the price, with the number of shares sold, are instantly telegraphed, by the instrument in the hall, to the headquarters of the stock-telegraph company, and thence in all directions to brokers’ offices, hotels and other places where indicators are kept. The sale thus made determines the price of stock at that moment, and will be obseryed with interest by hundreds of speculators who are closely watching the telegraph instruments in different parts of the city. The next day, before 2.15 P. M., the broker, by whom the stock was sold, will send 100 shares of Union Pacific to the firm through whom it was bought, and a check for the yalue will be giyen in return. If the customer chooses to pay cash for the stock, he will of course take it and keep it in his own possession ; but if it is bought on a margin or against a Put, it will be locked up in his broker’s safe till tbe order to sell it is giyen. If the stock is bought “ buyer 3 ” it need not be receiyed and paid for until the third day afterwards ; if bought ^^casli” it must be taken and paid for the same day. In this way the business of Wall Street goes on with perfect method and exactness, the yast negotiations of each day being carried out on the following one Avithout failure or misunderstanding. The system affords the strongest of all proofs of the rapidity with which immense dealings in stocks can be carried on, and of their adyantage, in this respect, oyer all other forms of inyestment. No. lO WALL STREET, NEW YORK. 29 Profits Made on Privileges. When Privileges are bought at the right time on any of the active stocks, the profits realized on them is very large, when compared with the small amount paid for the contracts. v The following table will show the profits made on Puts and Calls, on 100 shares of the most active stocks, during the first six months of 1875. On contracts for less than 100 shares, the profits were in the same proportion. Feb. 18, Western Union sold at 70J, and Calls were sold at 73i ; Mar. 17, the price was 78^, and Call contracts were settled at a net profit of Feb. 27, Pacific Mail sold at 33, and Calls were sold at 25 ^ ; March 27, the price was 451, and Call contracts were settled at a net profit of March 1, Union Pacific sold at 40f, and Calls were sold at 411 j Mar. 29, the price was 681, Call contracts were settled at a net profit of March 1, North-west sold at 38|, and Calls were sold at 401 ; Mar. 9, the price was 45 1, and Call contracts were settled at a net profit of March 1, Wabash sold at 111, and Calls w’ere sold at 12f ; March 30, the price was 18, and Call contracts were settled at a net profit of April 22, Ohio and Miss, sold at 281, and Puts were sold at 27; May 21, the price was 21, and Put contracts were settled at a net profit of May 8, Erie sold at 301, and. Puts were sold at 29; May 26, the price was 161, and Put con- tracts were settled at a net profit of May 8, Lake Shore sold at 72f, and Puts were sold at 71 ; June 1, the price was 57, and Put contracts were settled at a net profit of May 8, Pacific Mail sold at 441, and Puts were sold at 421; June 3, the price was 32, and Put contracts were settled at a net profit of June 1, Union Pacific sold at 791, were sold 77; June 3, the price was 701, and Put contracts were settled at a net profit of June 1, St. Paul sold at 351, and Puts were sold at 34; Juno 12, the price was 28 1, and Put contracts were settled at a net profit of June 1, Western Union sold at 711, Calls were sold at 731; June 29, the price was 781, and Call contracts were settled at a net profit of $381.25 $856.25 $2,518.25 $418.75 $406.25 $481.25 $1,131.25 $1,281.25 $906.25 $656.25 $418.75 $331.25 30 L. W. HAMILTON & CO., STOCK BROKERS, A Daily Report of the Stock Market. For the benefit of our customers we publish a Daily Report of all sales made at the Stock Exchange, which will be mailed free to any address. In addition to the market report and rates for Stock Privi- leges, we also give a brief report of Wall Street news, and endeavor to keep our readers posted regarding the probable course of the market. It frequently occurs that we receive private information regarding some particular stock that will materially affect its value as soon as the facts are made public, and when our customers act on such information they are almost sure to make a profit. Should it become known that a Railway Company will fail to pay the interest on its bonds when due, the stock will be sure to fall, and parties who buy Puts on it before the decline takes place will be certain to realize a large profit. On the other hand, should the earnings of a Company show a marked increase, and the prospect of a dividend on the stock be favorable, the price would rapidly advance. In this case, parties buying Calls would make a handsome profit. The rise and fall in the price of all active stocks, which is daily taking place, is almost invariably preceded by certain signs well known to the careful observer. For instance, when the price of the bonds of a company have advanced, v/e are con- fident that the stock will rise ; but when the price of the bonds have declined, we expect to see a fall in the price of the stock. It often occurs that a party desirous of speculating in a certain stock is undecided which to purchase, a Put or a Call. If it were pos- sible for a person to foresee the movement in stocks, he would know what kind of a Privilege to purchase. But as the wisest are often mistaken in their views regarding the future course of the market, many prefer to buy Spreads, so that should the stock either advance or decline, they are sure of a profit. If they have a Spread, and the stock falls, they settle the Put side of the contract ; if it rises, they settle the Call side. Many of our customers residing at a distance send us orders for Privileges, leaving it to us to make the investment in such stocks as in our judgment seems best. To our old customers it is needless for us to say that such orders always receive our careful attention. But, to those who may favor us with an order for the first time, we would say that whenever we do not consider it prudent to execute the order immediately, we await a more favorable time before making the investment. All persons desirous of receiving our Market Report, regularly, must send their address to our ofiice. / No. lO WALL STREET, NEW YORK. 31 L. W. HAMILTON & CO., ^Stock ^rokers, No. 10 WALL STREET, NEW YORK. We buy and sell on commission, for cash or on a margin, Railway Stocks, Bonds, Gold, and all securities dealt in at the New York Stock Exchange. All stocks bought or sold on a margin of 5 per cent, of their par value, amounting to $500, on 100 shares. Stocks bought or sold against Privileges, on a deposit of a sum equal to the difference between the market price of the stock and the contract price of the Privilege, and $50 to cover commission and interest charges. Less than 100 shares will not be bought or sold on a margin or against a Privilege. Interest at the rate of seven per cent, per annum is charged for money advanced to buy stocks. We also pay particular attention to purchasing Stock Privileges, and can always secure Puts, Calls, Spreads or Straddles on all active stocks, signed by members of the Stock Exchange, or other responsible parties, at the best market rates. Contracts purchased for parties residing at a distance from New York will be held by us subject to their order, for which a certificate of pur- chase will be issued. In order to be able to take advantage of the market, and settle Privileges at the most favorable time, it is necessary that we should retain the contracts in our possession. Our thorough know'ledge, acquired by years of experience in the Exchange, of the movements of the pow’erful combinations of capitalists, often formed to control the prices of the leading stocks, and an intimate acquaintance with the principal operators, enables us to give our customers valuable information regarding the most desirable stocks to operate in, and the method most likely to be successful. In the buying or selling of stocks and Privileges, w^e do a strictly commission business, consequently are entirely disinterested when we advise our customers of the probable course of the market, and the ]»roper time to buy or sell in order to secure the largest profit. Much of our well-deserved popularity, and the rapid increase of our business, may be attributed to the sound and honest advice which w’e have al- w^ays given our customers. All orders by mail or telegraph will receive prompt attention. Money can be remitted by draft, money order, express or registered letter with perfect safety and at our risk.