why are there two different prices? what do these mean in relation to selling and/or purchasing shares of stock?
2006-11-30 06:04:37 · 8 answers · asked by loveholio 5 in Business & Finance ➔ Investing
When you buy a stock or option you will pay the Ask price, and when you sell your stock or option, it will be sold at the Bid price.
2006-11-30 11:57:51 · answer #1 · answered by Anonymous · 0⤊ 0⤋
Yes, the stock can go up to $5 in a month, but keep in mind that a $2 profit is made up of 200 pennies. Usually the stock doesn't just jump from $3 to $5 in the blink of an eye. It goes up little by little. The smallest increment is a penny. And you are almost correct. The bid and ask works like you said. The only difference is that there is usually much smaller gap between the bid and the ask. Let's say there might be 100 shares for sale at $5.05 and someone is looking to buy 100 shares at $5.02. The difference is called spread. The spread in this case is 3 pennies. That's a much more realistic number. So, what happens if you buy 100 shares at the market? You snatch up the 100 shares that are for sale at $5.05, and the next available price becomes visible now. The Ask changes from 5.05x100 to let's say 5.05x400. And at the same time, the price of the stock becomes $5.05, because of your purchase. If the stock was $5.02 earlier, then it suddenly jumps up 3 cents. If you want to buy another 100 shares, the price of the stock would jump up to $5.05. Now, a trader looking at this activity on the other side of the country might think, WOW. LOOK AT THAT! THIS STOCK IS STARTING TO GO UP. I BETTER RAISE MY BID. So, they raise the bid from 5.02 to 5.04 maybe. Now, if the next person happens to be a seller, then what happens? The stock goes back to 5.04. This is how stocks move--little by little. The ASK and the BID is what makes this movement possible. PS: When we're talking about BID/ASK SIZE, the $5x100 usually means 100 times 100. So, if you see $5x700, that's not 700 shares but 700 times 100 shares = 70,000 shares. ;)
2016-05-23 05:25:48 · answer #2 · answered by Anonymous · 0⤊ 0⤋
Bid is the amount the guys is willing to sell,
Ask is the asking price from the bidder,
Bid is always higher than ask price.
2006-11-30 06:07:58 · answer #3 · answered by Vijay Chandran 2 · 0⤊ 0⤋
The bid is the price that a buyer has stated he will buy at. The Ask price is the price a seller has stated that he will sell at.
2006-11-30 06:07:19 · answer #4 · answered by Anonymous · 1⤊ 0⤋
The asking price is the price the seller is asking. The bidding price is the price you will pay for the item. If you are high bidder the seller might lower his asking price to your bid price and you will get the item.
2006-11-30 06:08:16 · answer #5 · answered by Nicholas F 1 · 1⤊ 0⤋
A bid is what someone is offering to pay for it. Ask is what someone is willing to sell it for. When the bid & ask meet, the stock is sold. If there's a gap between what someone is willing to pay for it and what someone is willing to sell it for, nothing changes hands.
2006-11-30 06:06:51 · answer #6 · answered by c_a_cudmore 2 · 1⤊ 0⤋
Bid is what the wirehouse will buy it from you.
Ask is what the wirehouse will sell it to you for.
The difference is "the spread," and that's how the UBS's of the world make big money.
2006-11-30 07:25:17 · answer #7 · answered by pretzel2222 3 · 1⤊ 0⤋
bid is the price you can bid it for, ask is price they asking
2006-11-30 06:11:53 · answer #8 · answered by Pinky 2 · 1⤊ 0⤋