Gambling Contract

One in which the parties in effect stipulate that they shall gain or lose upon the happening of an uncertain event in which they have no interest except that arising from the possibility of such gain or loss. 153 Pa. St. 247. Gambling contracts may be by bet or wager (g. v.), which is their simplest form; by lottery (g. v.); or they may be disguised in the form of a legitimate transaction, the ordinary form being by dealing in futures (g. 1).) infra. The validity of such contracts the goods bargained for, or to settle on the basis of difference in price (155 III. 617; 53 N. Y. 318; 69 Wis. 197). The course of speculative dealing has given rise to a number of technical terms, some of which are here defined. "Bulls and Bears." See infra, this title, "Long"; "Short." "Corner." An artificial scarcity created by holding property off the market for the extortion of abnormally high prices. Where the purchases of any party or parties exceed the amount of contract grain in regular warehouses on the last delivery day of the month for which such purchases have been made, the grain so bought is said to be cornered. "Cover." The buying in of grain or stocks to fill short contracts is called "covering." "Covering shorts." Buying in property to fill contracts (usually for future delivery) previously made. "Delivery." When stock is brought to the buyer in exact accordance with the rules of the stock exchange it is called a "good delivery." When there are irregularities, the shares being of unacceptable issues, or the rules of the exchange being contravened in some particular, the delivery is pronounced "bad," and the buyer can appeal to the board. Also when warehouse receipts for grain are delivered in fulfillment of contracts. "For a turn." Said of a speculative investment for a small profit or loss. A quick play. A "flyer." See infra, this title, "Scalping." "Futures." Buyers of cash product? protect themselves against possible loss by selling an agreed amount for future delivery in some general market. Such contracts are called "futures" because they do not terminate until some designated month in the future. These transactions pass from hand to hand, and may be turned over hundreds and thousands of times in an active market before maturity, and this is called "dealing in futures." Nearly all speculative operations are in futures. "Hedge." The operation called "hedging" by speculators is practically the same as "straddling," though the terms are not synonymous. Traders hedge to avert a loss, and straddle for a profit. See infra, this title, "Straddle." "Holding the market." Buying sufficient stock or commodities to keep the price from declining. "In sight." Said of stocks of grain, cotton, coffee, or other merchandise available for immediate use. Grain stored in private Warehouses, or held by producers, is not usually included in the supply "in sight." "Insiders." Those who own a controlling interest or an important interest in the stocks of a concern, and* who are therefore influential in directing its affairs. for speculation, or for a quick turn in tbfe market. It is understood to mean buying -to hold for a considerable time. "Long." One who has property bought in anticipation of a rise in price. Hence, for a trader to be "long" of stocks or grain presupposes him to be a "bull." Also used adjectively. "Long interest." The aggregate amount of investment holdings in any speculative market. "Long market." A market that is overbought, the volume of open contracts to buy property for future delivery being in dangerous excess of the probable demand. "Margin." Money or collaterals deposited with a broker to protect contracts, usually for future delivery. "Option." Property bought or sold at the call or demand of the buyer or seller, as may be specified; a conditional contract. "Outsiders." The general trading public. The investors in stock or grain who base their judgment largely on the general situation. "Pegged." Said of a market that refuses either to advance or to decline, because brokers have been supplied with selling or buying orders in excess of the demand. "Privileges." "Puts" and "calls." A "p Mt" is the privilege or option, which a person purchases, of "putting," i. e., delivering property or contracts for property to the seller of such privilege, at a named price, within a stipulated time, — one or more days, weeks, or months. "Puts" are good (from the buyer's standpoint) when the market declines below the "put" price within the time covered by the privilege contract. The buyer can then buy the property at the cheaper figure, and "put" it to the person who sold him the risk, his profit being the difference between the "put" price and the quotation at which the property is bought with which to make the delivery. A "call" is the reverse of a "put," the purchaser of a "call" acquiring the right to "call" upon the seller of the privilege for property, or contracts for property, at a named price, vrithin a stipulated time. "Calls" are good when the market advances above the call price, and the buyer of such privilege is enabled to sell at a profit the property "called" from the seller of the privilege. Trading in privileges is illegal in some states, notably in Illinois. "Pyramiding." Enlarging one's operations by the use of profits which one has made. "Scalper.'' One who trades in options continually, and, by reading the temper of the market at the moment, tries to get a profit out of the minor fluctuations. "Scalping." Buying and selling on small fluctuations of the market. Taking a small profit or a small loss. "Short," or "Short interest." The seller of a property which he does not possess and by necessity, a "bear." The aggregate amount of such shortage by these sellers is called the "short interest." "Short market." A market that is oversold; the volume of open contracts to deliver property being in dangerous excess of available supply. "Short selling." The process of selling property for future delivery, in the expectation of being able to obtain the property cheaper before the maturity of contract, or of being able to close out the contract at a profit without the actual delivery of the property. "Split." A transaction, one-half at one quotation and one-half at another. For instance, the quotation 53-%-% means that one-half of the quantity traded in was at 53% and the other half at 53%. This quotation is just half-way between 53% and 53%. Only an even number of thousand bushels can be traded in on a split, as, for instance, 2,000, 6,000, 10,000, etc. "Spread." A "spread" is a double privilege entitling the holder to deliver to, or to demand from, the signer a certain amount of stock on the terms specified. Differences in prices, as between May and July wheat, or between the put and call price, or between the price of the same option in different cities. "Squeezed." Said of "short sellers," who, by reason of having oversold the market, are forced to pay an artificially high price for property with which to fill contracts. "Stop order." An operator may give his broker orders to close out his deals when the market goes against _ him, _ and when quotations reach a certain point, and in that case he is said to have given a "stop order." When a declining market is filled with "stop orders" to sell, the bears may make extraordinary efforts tp force quotations down to a point which reaches the "stop orders," and which will thus throw on the market more securities or commodities. In the same way, on an advancing market, the bulls may endeavor to raise quotations to a point that will reach stop orders of short sellers, and force their brokers to become buyers. "Straddle." A trader who is "long" of one option and "short" of another option has "straddled" the market. Example: A. buys corn for May delivery, and sells an equal amount for December delivery, in the expectation that the former will advance and the latter decline. It is also called a "straddle" when a trader buys property for future delivery in one market, and sells in another. "Wash trades." Pretended trading. Trades made on an open market by parties between whom there is a tacit or private understanding that they shall be void. Done with a view to influence prices, and considered a reprehensible practice.