In the stock market, why have a stock PRICE when trading/investoing occurs on the BID and ASK?

Question

In the stock market, why have a stock PRICE when trading/investoing occurs on the BID and ASK?

So if the price goes up on ABC company to $20.00, I can't sell it at that price because the BID is only $19.50....... Again, why have a price when we have BID and ASK figures?

Jim

Answer 1

The price simply refers to the last price at which shares were transacted (bought or sold). I don't know what $20 stocks you are trying to buy with $0.50 spreads, that's huge. For the most liquid stocks, spreads are in the pennies,,,like $0.01 to $0.05.

Answer 2

Many prices take place between the bid and the ask. For example, suppose the bid is 20,00 and the ask is 20.20. If a market buy and a market sell hit the floor at the same time, the specialist may elect to pair the trades at a price of 20.10.

The prices that are reported are actual prices where the stock has traded. Using the bid and ask doesn't really help much if the spread is too wide and no trades are taking place.

Answer 3

The bid and ask are basically theoretical prices, guidelines on what to reasonably offer to expect a fill. The price was (past tense) the last actual agreed value. If you watch the tick by tick trades you will see trades made between the bid and ask, at the bid, at the ask, and also outside of the bid or the ask. Sometimes at the end of the day a trade is rectified between brokers and changes the apparent closing price for the day significantly. Even tho it may have only been for 100 shares while tens of thousands traded right up to the close at the noticeably higher or lower price what everyone sees till the next morning is that one off beat transaction. This also can happen with after hour orders. In short both bid/ask, the spread between them, and the last price have meaning.

Answer 4

You obviously want to sell at the highest price. However, if you enter a market sell order, your shares will automatically be sold at the bid price (the highest offer to purchase shares). The market price is simply the price at which the stock was last transacted. If you have patience, you would enter a limit order with some dollar amount in between the bid and ask to get a bid sale.

Answer 5

Good question, Jim. The stock price indicates the last price a trade was made, but certainly doesn't guarantee a trade at that price. As you indicated, the bid and ask are all that really matters.