Scenario:
1) "Nobody will buy a thing that he dunno what is the price?"
2) "Nobody sane will buy a thing that he dunno what it is?"
This shows us the importance of price in our daily life.
Therefore, how is price set:
A) Nominal Price - or what we call the real price of an object under normal circumstances.
B) Buyer Price - a price buyer willing to pay
C) Seller Price - a price buyer willing to sell
D) Settlement Price - a price that people settle for, after a certain premium or discount to the nominal price due to condition or time factor.
Here, we will use 2 items as examples: Water and Share of a Company.
I) Water will have:
A) Nominal Price nearly zero, because it is easily available under normal circumstances.
B) Buyer Price - In a desert and someone dying of thirst, it will have the price that someone willing to pay that is higher than gold.
C) Seller Price - During raining season, the price that seller sell is negligible.
D) Settlement Price - Water is supplied by the government with pro-rated cost with some profit via water tap to most citizens in the world.
II) Share of a company be based on:
A) Nominal Price - Price at liquidation of the company per share.
B) Buyer Price - A price as cheap as possible, so that a buyer can maximize his profit.
C) Seller Price - A price as expensive as possible, so that a seller can maximize his profit.
D) Settlement Price - A Discount to Seller Price and also a Premium to buyer Price so that both seller and buyer reach a deal.
Comments:
1) Margin is the result of seller price minus the buyer price.
2) Margin multiply by volume gives you, your profit or loss.
3) That's why in economics it's your margin and volume that counts.
4) In stock, it's your Margin of Safety and Position Sizing that matters.
"Fate Favored Those Who are Prepared"
Yours Sincerely,
Dr. Lion.
1) "Nobody will buy a thing that he dunno what is the price?"
2) "Nobody sane will buy a thing that he dunno what it is?"
This shows us the importance of price in our daily life.
Therefore, how is price set:
A) Nominal Price - or what we call the real price of an object under normal circumstances.
B) Buyer Price - a price buyer willing to pay
C) Seller Price - a price buyer willing to sell
D) Settlement Price - a price that people settle for, after a certain premium or discount to the nominal price due to condition or time factor.
Here, we will use 2 items as examples: Water and Share of a Company.
I) Water will have:
A) Nominal Price nearly zero, because it is easily available under normal circumstances.
B) Buyer Price - In a desert and someone dying of thirst, it will have the price that someone willing to pay that is higher than gold.
C) Seller Price - During raining season, the price that seller sell is negligible.
D) Settlement Price - Water is supplied by the government with pro-rated cost with some profit via water tap to most citizens in the world.
II) Share of a company be based on:
A) Nominal Price - Price at liquidation of the company per share.
B) Buyer Price - A price as cheap as possible, so that a buyer can maximize his profit.
C) Seller Price - A price as expensive as possible, so that a seller can maximize his profit.
D) Settlement Price - A Discount to Seller Price and also a Premium to buyer Price so that both seller and buyer reach a deal.
Comments:
1) Margin is the result of seller price minus the buyer price.
2) Margin multiply by volume gives you, your profit or loss.
3) That's why in economics it's your margin and volume that counts.
4) In stock, it's your Margin of Safety and Position Sizing that matters.
"Fate Favored Those Who are Prepared"
Yours Sincerely,
Dr. Lion.
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