Bid and Ask prices

Sykk

Hey guys,

I've done some research on this but can't really get my head around it.

"When placing a trade you would typically be buying at the ask price and selling for the bid price."

For example: I hold some shares in Activision Blizzard. I've no intention of selling but I check it regularly.

At present each share is worth 12.07. The bid price is 11.18 and the ask is 12.78

Why on earth would I want to sell them for 11.18? As well as that, why is the bid price so high? Who sets these things? If I was to attempt a sale for the 12.78 is there a chance they'd sell?

Thanks

strmin

Most likely you see limit orders before or after hours. Spread can't be that wide during trading hours.
You would have a chance to sell for 12.78 only if someone was willing to pay 12.78

ixus

Sykk wrote: »

At present each share is worth 12.07. The bid price is 11.18 and the ask is 12.78

The highest bidder at the present time is only willing to pay 11.18 to own that share.

The lowest seller is only willing to sell at 12.78.

The bid and offer (ask) price will change as other participants reset the price they are willing to trade at.

The reason the spread is so wide is because it is an illiquid market.

Most volume is usually done at the open and close of the cash market. If you put in an offer order at a price you were willing to sell at, this is when it would most likely be filled.

betonit

is for a seller the market price the bid price?

coylemj

betonit wrote: »

is for a seller the market price the bid price?

The 'market' or quoted price is the price at which the last deal was registered. However that could have been a small deal at a bargain price to clear out the remnants of a bigger sale so it isn't necessarily available to the next buyer/seller.

If you're selling then you need to check the 'bid' price, that is the highest price being offered by a prospective buyer. If you're buying you need to check the 'ask' price which is the lowest price currently being sought by a seller.

If you're dealing electronically and you're prepared to sell at the bid price or buy at the ask price, the sale should go through straight away, provided in the case of a buy that there's enough shares on offer at the price you're prepared to pay and in the case of a sell that there is a buyer prepared to take all of the shares you're selling.

If you don't like the current prices and you want to hold off for a lower buy price or a higher sell price, you can place a 'limit' order where you instruct your broker to buy or sell at a limit i.e. if buying you say the maximum price you'll pay and if selling the minimum price at which you'll sell.

BrokenArrows

On the same topic how many shares need to be put up for sale for the Ask price to be changed.

Example.

Current ask price is 12.00

I place a sell order for 1 share at 11.99. Obviously this does not affect the current ask price and it remains at 12.00. What determines if my sell order should affect the ask price?

ixus

BrokenArrows wrote: »

On the same topic how many shares need to be put up for sale for the Ask price to be changed.

Example.

Current ask price is 12.00

I place a sell order for 1 share at 11.99. Obviously this does not affect the current ask price and it remains at 12.00. What determines if my sell order should affect the ask price?

Only 1 share needs to be put up for sale.

Your second last sentence is incorrect, you do affect the current ask price as you have now moved to the front of the queue as you're willing to sell at the lowest asking price.

coylemj

ixus wrote: »

Only 1 share needs to be put up for sale.

Your second last sentence is incorrect, you do affect the current ask price as you have now moved to the front of the queue as you're willing to sell at the lowest asking price.

But is there a broker out there who would accept a 'sell' order for a single share?

BrokenArrows

ixus wrote: »

Only 1 share needs to be put up for sale.

Your second last sentence is incorrect, you do affect the current ask price as you have now moved to the front of the queue as you're willing to sell at the lowest asking price.

I actually tried it before. I put 1 share up for sale on a very low trading stock (so it was unlikely someone would buy). I left it for 10 minutes and the ask price was still showing as higher than my lower price.

It was an online system so not sure if it takes longer to filter down but at the time i was supposed to be on a live price reporting system.

zephyro

Sykk wrote: »

At present each share is worth 12.07. The bid price is 11.18 and the ask is 12.78

Why on earth would I want to sell them for 11.18? As well as that, why is the bid price so high? Who sets these things? If I was to attempt a sale for the 12.78 is there a chance they'd sell?

That spread is ridiculous, where did you get it from? According to my online broker, at the close today ATVI was at 11.95-12.00.

Sykk

zephyro wrote: »

That spread is ridiculous, where did you get it from? According to my online broker, at the close today ATVI was at 11.95-12.00.

It's normal now. Was at my own broker, FXCM.

pirelli

zephyro wrote: »

That spread is ridiculous, where did you get it from? According to my online broker, at the close today ATVI was at 11.95-12.00.

Sykk wrote: »

It's normal now. Was at my own broker, FXCM.

When the market is closed the Market makers tend to leave prices at very wide spreads. Once volume returns when traders return the spread between bid and ask will return to normal which might be as much as a few pennies.

During trading hours on very high volume that is truncated towards selling or buying then again the spread will widen, too much volatility can also widen a spread.

Normal volume would usually be as little as 5 cents or less in the difference for ATVI.

OfflerCrocGod

Here's an order book picture - not in work atm so can't get better one but it shows things clearly enough to understand the dynamics. Some interfaces are terrible and confusing.

Mr_Roger_Bongos

Hi Offler,

Can i ask what platform your using for equities?

I've seen market depth for equities before but never in the same format as futures, like you've shown above.

OfflerCrocGod

That's a random one I grabbed from the net, I much prefer that format over all the other formats. It's very clear and quick to understand.