How do security dealers earn their profits?
Through frequent trading at bid and ask price and by trading on information not available to others.
A security dealer is an individual or a firm who regularly purchases securities at bid price and sells at ask price.
One of the ways how a security dealer earns profit is through frequent trading at bid and ask price thereby pocketing spread as trading profit. Other than this, being the specialist of securities, they also profit by trading on information not available to others.
Call one full-service broker and one discount broker and find out the transaction costs of implementing the following strategies:
a. Buying 100 shares of IBM now and selling them six months from now.
b. Investing an equivalent amount in six-month at-the-money call options on IBM stock now and selling them six months from now.
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