Is it possible for a bid price of a stock to be $0.20 wheras it's asking price $0.55? Why?

Answer 1

The difference between the bid and ask price of a stock is known as the bid ask spread.

Many factors affect the displayed bid ask spread of any stocks but the main reason is the Liquidity of a stock . Generally, the more liquid, the more commonly traded a stock is the closer the bid and ask price would be. This is because many people are asking for and bidding for the stock at the same time and do not give market makers much chance to open up the bid ask spread to make more money. Yes, when a stock is very thinly traded, the market maker literally buys from you and sells to other sellers and makes the difference in the bid and ask price and hence the bid ask spread.

For stocks that are very lilliquid, market makers take a big risk by buying it from you as it can be very difficult to find another buyer to sell to, that is why they will justify that risk with a wide bid ask spread and hence a greater profit. Stocks that are very cheap like the one you are looking at are very lilliquid and hence a wide bid ask spread. Examples are like PAM and NGRU which has a daily volume of only about 10,000 to 50,000. A liquid stock should range about 300,000 to 500,000 transactions a day.







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Answer 2

Sellers can ask any number that they think makes sense and that they think they might get. However the Buyer decides how much they would like to pay. Each has done their own calculation as to the number that would make economic sense. Don't forget that the seller does not have to accept the offer made for the stock. In that case a determined buyer might raise the offer or someone more generous might offer more.

Answer 3

The bid price is what you are offering to pay. The asking price is what they want you to pay or hope to get for the stock.

Answer 4

you can bid anything you like.