Understanding What are Securities
This page focuses on learning what are securities:
So what are securities?
Securities are certificates conferring ownership of a certain property or company. All kinds of securities are traded on the stock exchange
The main types of securities are: Stocks, bonds, warrants, and options (on stocks, foreign currency indexes, etc.).
Stocks - Certificates of Ownership
A stock certificate shows that its holder owns part of a certain company. What prevents somebody from walking into any company’s office and claiming to be the owner? Lack of proof in the form of a stock certificate is the answer.
Only a stockholder who owns a majority of a company’s stocks can claim to own that company. Currently, physical stock certificates are becoming increasingly rare, because most transactions concerning stocks are performed electronically. Most owners of stocks prefer electronic records of their stocks that are held by their brokers.
A bond is a deed conferring on its holder ownership of the amount of debt stipulated in the bond. The issuer of the bond (either a company or the government) receives money from the bond purchaser in return for a commitment to pay the debt later. Both companies and the government issue bonds.
The bondholder is actually the owner of the bond issuer’s debt.
A warrant is a certificate granting its holder the right to buy stocks in a company at a given price.
An option is a contract granting its holder the right to buy or sell a specific asset, at a given price, within a certain time period. The option holder is not obligated to carry out this transaction. Options can be issued for stocks, currencies and indices.