Bid - Ask

Elementary question, but I seem to have confused myself. Lets say i want to buy a stock and i place a market order. If there is enough size, do I get filled at the best ask price.
On the flip side If I am selling the stock at the mkt am I getting filled at the best bid?

 

It depends on your broker. They get to preempt the order and give you a price better than best ask or best bid if they'd like. But generally, if you're trading a 100-lot order, you'll be able to set a limit order and have it go straight to the market as its own bid or ask or you can set a market order which will mean, regardless of size (assuming it's 100 shares or less), you'll get at least the best bid or ask these days.

15 years ago, if you were trading 50 shares, the broker would round the price up or down on you for a net $1 bid-ask spread. Now with electronic and algorithmic market making, there's no need to do that- the cost of narrow spreads is now measured in watt-hours.

 

I think everyone might be confusing him. Illustration:

bid/offer = 100/100.1

Market order to BUY would LIFT the OFFER at 100.1.

Market order to SELL would HIT the BID at 100.

There may be bids at 99.9... 99.8... 99.7... etc. and offers at 100.2... 100.3... etc. But you usually get filled at the best bid/ask if there's enough size. There are little nuances about how your order is routed and your broker and things like that, but for academic purposes the above holds.

 
Best Response

I would stay away from talking market maker vs borker dealer, much more accurate to say market maker vs market taker, because the wya you are saying it is as if using specific job roles, but in reality people are usually market makers and market takers at various stages. For example I work on a sell side options desk, now if a client comes and asks for a quote i give him a bid and offer for example 19-21. This means the client can buy from me at 21 or sell to me at 19, if it was the other way around it would be quite stupid.Now on the other hand if i go into the broker market and see someone making a price of 18-19, and I just sold at 21, I will go lift at 19, in which case i am a market taker in that situation.

In your example if the market maker is quoting 10 - 10.25, why on earth would he be willing to sell at 10 and buy at 10.25? If that was the case you would buy it from him at 10 and sell it back to him at 10.25. If that is the quote you need to pay 10.25 to buy it.

If someone is willing to pay 10.5, then that means they are willing to pay 10.25, so they will lift 10.25, then the market maker might adjust his quote to 10.5 etc.

 
derivstrading:
I would stay away from talking market maker vs borker dealer, much more accurate to say market maker vs market taker, because the wya you are saying it is as if using specific job roles, but in reality people are usually market makers and market takers at various stages. For example I work on a sell side options desk, now if a client comes and asks for a quote i give him a bid and offer for example 19-21. This means the client can buy from me at 21 or sell to me at 19, if it was the other way around it would be quite stupid.Now on the other hand if i go into the broker market and see someone making a price of 18-19, and I just sold at 21, I will go lift at 19, in which case i am a market taker in that situation.

In your example if the market maker is quoting 10 - 10.25, why on earth would he be willing to sell at 10 and buy at 10.25? If that was the case you would buy it from him at 10 and sell it back to him at 10.25. If that is the quote you need to pay 10.25 to buy it.

If someone is willing to pay 10.5, then that means they are willing to pay 10.25, so they will lift 10.25, then the market maker might adjust his quote to 10.5 etc.

What do you mean you would "go lift" at 19? What would you lift? On the example I gave with ur answer, what do you mean "they are willing to pay 10.25, so they will lift 10.25, then the market maker might adjust his quote to 10.5 etc?"
 

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