Bid-ask price Question
(12 * 100) * 1.01 = 1212 Assuming the $12 ask can absorb your whole 100 share order.
&gt; we make a trade-off between time to execute and market impact.  Is your time frame any longer than intraday? I imagine you wouldn't want to carry that risk overnight if you're a broker or selling a route..  &gt; we will join the bid for some fraction of our size, and also hit the offer when it looks like the price might be moving away from us  So, say for instance you join a bid a few levels down, you aren't really get filled, you start hitting the offer and eventually you realize you're competing with someone for the shares offered, so you take out the price level and bid on all the exchanges so that you're first on the bid at that level, then repeat until someone that can match your appetite starts to fill you on the bid?  &gt; In some certain situations we will even sweep the book several levels deep to avoid tipping off market makers and having them adjust in anticipation of the rest of our order.  Right, so say you need 100k shares, there are 10k offered at 9.98, 25k offered at 9.99, and 65k at 10.00, you might just enter an intermarket sweep order of 100k @ 10 limit and hope that you can get most of the shares off before everyone can cancel?  I imagine there has to be a lot of bidding it up to attract sellers and then letting people take out your bids all day...  I have a few other questions I would appreciate your insight on. Just trying to ascertain how orders are filled when, as you put it, time is more important than market impact to the client - when they need to take a large amount of liquidity as quickly as possible and as orderly as possible.  Let me know if you'd rather I pm you about this or the additional questions, I work in the industry as well so I know privacy is paramount. "Say we have stock XYZ that costs $50 this second. It doesn't cost XYZ this second. The market price only reflects the last price at which the security traded. It doesn't mean that if you'll get that price when you place an order. The price you get if/when your order is filled is determined by the bid/ask spreads. Why would people sell below the current price, and not within the range of the bid/ask? Someone may be willing to sell at an ask price of $47 simply because that's the best price they think they can sell the security for. Keep in mind that the ""someone"" may be a computer that determined that $47 is a reasonable ask price. Remember that bid/ask spreads aren't fixed, and there can be multiple bid/ask prices in a market at any given time. Your buy order was filled because at the time, someone else in the market was willing to sell you the security for the same price as your bid price. Your respective buy/sell orders were matched based on their price (and volume, conditional orders, etc). These questions may be helpful to you as well: Can someone explain a stock's ""bid"" vs. ""ask"" price relative to ""current"" price? Bids and asks in case of market order Can a trade happen ""in between"" the bid and ask price? Also, you say you're a day trader. If that's so, I strongly recommend getting a better grasp on the basics of market mechanics before committing any more capital. Trading without understanding how markets work at the most fundamental levels is a recipe for disaster." "Honestly, I wonder if the other answerers aren't overthinking it. Their answers are detailed and correct, but what your coach may be saying is this: When you have bought a stock, on cash or margin, and you are watching it rise you are evaluating when you sell on the price of the stock you are seeing. In reality, you should look at the bid (price buyers will give you for the stock) and ask (price sellers will charge you for the stock) prices. If the stock is going up, odds are the price of the stock is very close to the ask price because it is purchases that are driving it up, but that's not what you're going to get when you sell. You're going to get something around the bid price. If the spread between the two is large (i.e. a volatile stock) this could be many cents or more lower than the ask price. Therefore, what your coach may mean by ""Selling on Ask"" is you're using the stock price when it's equal or close to the ask price to decide when to sell, instead of letting the stock peak and drop (when its price will approach the bid price) or letting the trailing bid offers catch up to your desired sell point and selling then (i.e. letting the stock point grow PAST your sell point, dragging the bid price up with it). Just a thought, but that sounds like a term a coach would come up with to mean selling and getting less than you thought you were going to from the sale. (I know it's a necro reply, but the Interwebs are immortal and people come via Google... I did)" You can ask for 305rs, but as long as shares are available at lower prices you won't sell. Only when your ask becomes the lowest available price will someone buy from you. See many past questions about how buyers and sellers are matched by the market. This is copying my own answer to another question, but this is definitely relevant for you: A bid is an offer to buy something on an order book, so for example you may post an offer to buy one share, at $5. An ask is an offer to sell something on an order book, at a set price. For example you may post an offer to sell shares at $6. A trade happens when there are bids/asks that overlap each other, or are at the same price, so there is always a spread of at least one of the smallest currency unit the exchange allows. Betting that the price of an asset will go down, traditionally by borrowing some of that asset and then selling it, hoping to buy it back at a lower price and pocket the difference (minus interest). Going long, as you may have guessed, is the opposite of going short. Instead of betting that the price will go down, you buy shares in the hope that the price will go up. So, let's say as per your example you borrow 100 shares of company 'X', expecting the price of them to go down. You take your shares to the market and sell them - you make a market sell order (a market 'ask'). This matches against a bid and you receive a price of $5 per share. Now, let's pretend that you change your mind and you think the price is going to go up, you instantly regret your decision. In order to pay back the shares, you now need to buy back your shares as $6 - which is the price off the ask offers on the order book. Similarly, the same is true in the reverse if you are going long. Because of this spread, you have lost money. You sold at a low price and bought at a high price, meaning it costs you more money to repay your borrowed shares. So, when you are shorting you need the spread to be as tight as possible. The Bid price is simply the highest buy price currently being offered and the Ask price simply the lowest sell price being offered. The list of Bid and Ask prices is called the market depth. When the Bid and Ask prices match then a sale goes through. When looking to sell you would generally look at both the Bid and Ask prices. As a seller you want to be matched with the Bid price to get a sale, but you also need to check the current list of Ask prices. If the price you want to sell at is too high you will be placed down the Ask price list, and unless the price moves up to match your sell price you will not end up selling. On the other-hand, if your price to sell is too low and in fact much lower than the current lowest sell price you may get a quick sale but maybe at a lower price than you could have gotten. Similarly, when looking to buy, you would generally also look at both the Bid and Ask prices. As a buyer you want to be matched with the Ask price to get a sale, but you also need to check the current list of Bid prices. If the price you want to buy at is too low you will be placed down the Bid price list, and unless the price moves down to match your buy price you will no end up buying. On the other-hand, if your price to buy is too high and in fact much higher than the current highest buy price you may get a quick purchase but maybe at a higher price than you could have gotten. So, whether buying or selling, it is important to look at and consider both the Bid and Ask prices in the market depth. To add to @Victor 's answer; if you are entering a market order, and not a limit order (where you set the price you want to buy or sell at), then the Ask price is what you can expect to pay to purchase shares of stock in a long position and the Bid price is what you can expect to receive when you sell stock you own in a long position. "Here is how I would approach that problem: 1) Find the average ratios of the competitors: 2) Find the earnings and book value per share of Hawaiian 3) Multiply the EPB and BVPS by the average ratios. Note that you get two very different numbers.  This illustrates why pricing from ratios is inexact.  How you use those answers to estimate a ""price"" is up to you.  You can take the higher of the two, the average, the P/E result since you have more data points, or whatever other method you feel you can justify.   There is no ""right"" answer since no one can accurately predict the future price of any stock." It could be that the contracts were bought at cheaper prices such as $.01 earlier in the day. What you see there with the bid and ask is the CURRENT bid and CURRENT ask. The high ask price means there is no current liquidity, as someone is quoting a very high ask price just in case someone really wants to trade that price. But as you said, no one would buy this with a better price on a closer strike price. The volume likely occurred at a different price than listed on the current ask. A bid is an offer to buy something on an order book, so for example you may post an offer to buy one share, at $5. An ask is an offer to sell something on an order book, at a set price. For example you may post an offer to sell shares at $6. A trade happens when there are bids/asks that overlap each other, or are at the same price, so there is always a spread of at least one of the smallest currency unit the exchange allows. Betting that the price of an asset will go down, traditionally by borrowing some of that asset and then selling it, hoping to buy it back at a lower price and pocket the difference (minus interest). So, let's say as per your example you borrow 100 shares of company 'X', expecting the price of them to go down. You take your shares to the market and sell them - you make a market sell order (a market 'ask'). This matches against a bid and you receive a price of $5 per share. Now, let's pretend that you change your mind and you think the price is going to go up, you instantly regret your decision. In order to pay back the shares, you now need to buy back your shares as $6 - which is the price off the ask offers on the order book. Because of this spread, you have lost money. You sold at a low price and bought at a high price, meaning it costs you more money to repay your borrowed shares. So, when you are shorting you need the spread to be as tight as possible. In order to see whether you can buy or sell some given quantity of a stock at the current bid price, you need a counterparty (a buyer) who is willing to buy the number of stocks you are wishing to offload. To see whether such a counterparty exists, you can look at the stock's order book, or level two feed. The order book shows all the people who have placed buy or sell orders, the price they are willing to pay, and the quantity they demand at that price. Here is the order book from earlier this morning for the British pharmaceutical company, GlaxoSmithKline PLC.  Let's start by looking at the left-hand blue part of the book, beneath the yellow strip. This is called the Buy side. The book is sorted with the highest price at the top, because this is the best price that a seller can presently obtain. If several buyers bid at the same price, then the oldest entry on the book takes precedence. You can see we have five buyers each willing to pay 1543.0 p (that's 1543 British pence, or £15.43) per share. Therefore the current bid price for this instrument is 1543.0. The first buyer wants 175 shares, the next, 300, and so on. The total volume that is demanded at 1543.0p is 2435 shares. This information is summarized on the yellow strip: 5 buyers, total volume of 2435, at 1543.0. These are all buyers who want to buy right now and the exchange will make the trade happen immediately if you put in a sell order for 1543.0 p or less. If you want to sell 2435 shares or fewer, you are good to go. The important thing to note is that once you sell these bidders a total of 2435 shares, then their orders are fulfilled and they will be removed from the order book. At this point, the next bidder is promoted up the book; but his price is 1542.5, 0.5 p lower than before. Absent any further changes to the order book, the bid price will decrease to 1542.5 p. This makes sense because you are selling a lot of shares so you'd expect the market price to be depressed. This information will be disseminated to the level one feed and the level one graph of the stock price will be updated. Thus if you have more than 2435 shares to sell, you cannot expect to execute your order at the bid price in one go. Of course, the more shares you are trying to get rid of, the further down the buy side you will have to go. In reality for a highly liquid stock as this, the order book receives many amendments per second and it is unlikely that your trade would make much difference. On the right hand side of the display you can see the recent trades: these are the times the trades were done (or notified to the exchange), the price of the trade, the volume and the trade type (AT means automatic trade).  GlaxoSmithKline is a highly liquid stock with many willing buyers and sellers. But some stocks are less liquid. In order to enable traders to find a counterparty at short notice, exchanges often require less liquid stocks to have market makers. A market maker places buy and sell orders simultaneously, with a spread between the two prices so that they can profit from each transaction. For instance Diurnal Group PLC has had no trades today and no quotes. It has a more complicated order book, enabling both ordinary buyers and sellers to list if they wish, but market makers are separated out at the top. Here you can see that three market makers are providing liquidity on this stock, Peel Hunt (PEEL), Numis (NUMS) and Winterflood (WINS). They have a very unpalatable spread of over 5% between their bid and offer prices. Further in each case the sum total that they are willing to trade is 3000 shares. If you have more than three thousand Dirunal Group shares to sell, you would have to wait for the market makers to come back with a new quote after you'd sold the first 3000. "Re: A trader when buying needs to buy at the ask price and when selling needs to sell   at the bid price. So how can a trade happen 'in between' the bid and ask? Saying the trade can happen ""in between"" the bid & ask is simplistic.  There is a time dimension to the market.  It's more accurate to say that an order can be placed ""in between"" the current best bid & ask (observed at time T=0), thus establishing a new level for one or the other of those quoted prices (observed at time T>0). If you enter a market order to buy (or sell), then yes, you'll generally be accepting the current best ask (or best bid) with your order, because that's what a market order says to do: Accept the current best market price being offered for your kind of transaction.  Of course, prices may move much faster than your observation of the price and the time it takes to process your order – you're far from being the only participant. Market orders aside, you are free to name your own price above or below the current best bid & ask, respectively. ... then one could say that you are placing an order ""in between"" the bid and ask at the time your order is placed.  However – and this is key – you are also moving one or the other of those quoted prices in the process of placing your above-bid buy order or your below-ask sell order. Then, only if somebody else in the market chooses to accept your new ask (or bid) does your intended transaction take place. And that transaction takes place at the new ask (or bid) price, not the old one that was current when you entered your order. Read more about bid & ask prices at this other question: (p.s. FWIW, I don't necessarily agree with the assertion from the article you quoted, i.e.: ""By looking for trades that take place in between the bid and ask, you can tell when a strong trend is about to come to an end.""  I would say: Maybe, perhaps, but maybe not.)" This question is impossible answer for all markets but there are 2 more possibilities in my experience: The options market requires much more attention to avoid the situation you're describing. An overnight $10 ask will remain on the books most likely as Good-Til-Canceled.  The first to bid the low order gets it.  If traders are paying attention, which they probably are then they will bid at $10.  If not, they will bid immediately at $20. If they crossed the order, it would be filled at their higher than $10 bid. This is all governed by the exchange where the ask is posted, and most implement price-time priority. In practice, it would not work. If you put a bid in that was really out of line, even if it got filled, the exchange would reverse it.  Other than that it really depends on what the current bid/ask spread it, and what volume its trading, as well as how the market feels. Say the current bid is 11 and you put an order in with bid 11.5, it would soak up all the orders on the market up to the volume your buying. But once your order is filled the market will be determined by what the next order's bid/ask is. It might stay where you moved it too if others feels thats a fair price. But if every other order on the market is still at 11, then the price isnt gonna move.  tl;dl unless your a market maker, you could not realistically affect the price.