Monday, May 23rd, 2016

How does the bid/ask spread work in online stock trading?

I use Sharebuilder, and right now for JMBAU, the quote is $ 2. 83 and the “ask” is $ 6. 00 x 200. If I were to purchase shares of At This quote using market order, would I be paying $ 2. 83/share or $ 6. 00/share?


5 Responses to “How does the bid/ask spread work in online stock trading?”
  1. gosh137 says:

    Last time I used a market order with a discount broker, they bought shares at 3am for $2 over the previous days closing price and the next days opening price. Never again. I only use limit orders now.
    On your stock, notice it does not have a high volume of shares trading per day (only about 8,000) on Friday per It very well could cost you more than the $2 I was charged.

  2. Common Sense says:

    Never use quotes or buy/sell stock in “extended” trading. There’s to few traders and the spreads can be downright stupid.

    If you put in a market order (based on your info supplied) you’d pay $6.00 per share…. Why????? Because there may only be a couple of people offering the shares & they’re looking to rip you off! DON’T PLAY IN MARKETS YOU DON’T UNDERSTAND!

  3. Bob says:

    First: how bid/ask works has no difference between online and talking to a broker on the phone.

    You buy from a seller at his “asking” price and you sell to a buyer at the price he is “bidding”.

    The quote consists of two parts: the bid and the ask. The quote is not $2.83; that is the last trade. It is for historical information only and of no interest to you.

    What is of interest is 6.00×200 means that someone has 200 shares and wants $6.00 for them. That is what you might expect to pay for up to 200 shares. If you want more than that, who knows where the next higher offer is. (Actually, I do, because I have Level II quotes on my professional screen, but my license is for my use only, so I can’t post them here. Sorry) The other thing is that the bid is N/A which means that there is no bidder, i.e. nobody wants to buy this stock, so if you bought, who would you sell to if you changed your mind? If you just put in a market order to sell, some dealer might pick it up for literally pennies.

  4. gvoudzon says:

    I very much agree with gosh137, that in order to be seeing an asking price of $6/share when the last price was $2.83, must be because you are actually seeing an after hours quote. Some professional traders will actually set their bid and ask to be $0.01 by $99,999.99, when they go home at night so they wont find their whole world blown up the next morning when they come back to work. That means that they will buy anything for a penny and sell anything for $100,000. I have glimpsed such bids and asks once.

    The other reason why you might see an ask of $6 right after a last price of $2.83 would be if there was a sudden inrush of buy orders which absorbed all of the ask orders between $2.83 and $6. Perhaps the time lag to see the $5.99 sale get posted takes a few minutes.

  5. Michal says:

    need laptop with high pnrofrmaece in order to do internet day trading, if you can, please help in telling me the laptop model and any other thing i should setup for high pnrofrmaece trading system i.e. components to catch very fast data and display it through software’s, extra monitors, wireless devices, internet connection type etc.

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