Understanding the U.S. Stock Market

This book explains how the U.S. stock market actually works, and how people lose money in it.It does not teach you how to make money. It names no stock, no fund, no ticker, no broker. It issues no buy or sell instructions and predicts no price, rate, or policy. It does something else instead: it takes the machinery apart, one layer at a time, until you can see it.Eleven parts, seventy-eight chapters: how markets and prices work; stocks, dividends, buybacks, filings, and index construction; ETFs and funds, including creation and redemption, tracking error, fees, leveraged and inverse products, and liquidation; bonds and fixed income, including duration, the yield curve, credit, inflation protection, and how a bond fund differs from a bond; orders, accounts, brokers, trading sessions, and settlement; options, from contract mechanics to assignment and naked writing; short selling, leverage, and margin, and the property those three share - a worst case with no boundary; probability and statistics, and how to read an outcome; risk management, and the specific ways people are wiped out; macroeconomics, regulation, and the larger picture; and what to settle before you begin. Four appendices follow: a Chinese-English glossary, common questions, plain-language explanations of the core formulas, and a consolidated risk disclosure.Every worked example uses the same fictional company, ABC. Every figure is either invented or computed by the author. The one exception is the set of numbers written into U.S. market rules themselves, which are listed together in an appendix so that a reader can check, later, which of them have changed. 93 original illustrations, 242 tables.The book’s position is a single sentence: understanding a mechanism is not the same as being able to predict it, and in a position whose worst outcome has no boundary, a person does not have the information an informed decision would require.Educational content only; not investment advice. The author is not a licensed investment adviser. Securities trading involves substantial risk, and you may lose part or all of your principal. Consult a licensed professional before making any decision.