Stocks and Bonds


current price=actuall price of last trade. (perhaps mere seconds ago for very liquid stocks)
bid     price =max a buyer  is willing to pay for a security.
ask     price =min a seller is willing to receive for the security.
spread        =difference between bid and asked prices (smaller spread = more liquid)

A trade/transaction occurs when buyer & seller agree on a price!

The "Bid: 13.20 x200" means there are potential buyers bidding $13.20 for up to 200 shares.

Their bids are the highest currently bid; and there are others in line behind with lower bid prices.
So the "bid" you're seeing is actually the best bid price at that moment.
If you entered a "market" order to sell > 200 shares, part of your order may be filled at a lower price.

The "Ask: 13.27 x1,000" means there are potential sellers asking $13.27 for up to 1000 shares.

Their ask prices are the lowest currently asked; and there are others in line behind w/higher ask prices.
  So the "ask" you're seeing is the best asking price at that moment.
   If you entered a "market" order to buy more than 1000 shares, part of your order would likely be filled at a higher price.

transaction =potential buyer is willing to pay the asking price,
   a potential seller is willing to accept the bid price,
  they meet in the middle if both buyers and sellers change their orders.

2 kinds of stock exchanges.
1) order-driven matched bargain market
2) quote-driven over-the-counter market where there is a market-maker,
the spread between the bid & ask goes to the market maker as compensation for making a market in a stock.
liquid stock=easy for the market maker to turn around and buy/sell to somebody else, the spread is small (narrow).
illiquid stocks=harder to deal in, the spread is larger (wide) to compensate the market-maker having to potentially carry the stock in inventory for some period of time,

Finally ... if you wanted to buy 1000 shares, you could enter a market order, in which case as described above you'll pay $13.27.
If you wanted to buy your shares at no more than $13.22 instead, i.e. the so-called "current" price,
then you would enter a limit order for 1000 shares at $13.22.
And more to the point, your order would become the new highest-bid price (until somebody else accepts your bid for their shares.)
Of course, there's no guarantee that with a limit order that you will get filled;
your order could expire at the end of the day if nobody accepts your bid.

Notes about calls and puts

ALWAYS use "limit orders" with any purchase

Or  put options and call options

selling a "put" is the same thing as "shorting" a put

you get premiums instantly when you sell a put

you must buy/sell call/put options in 100 stock/share lots (called contracts)
  so 1 contract could be a put option for 100 stocks/shares
  or 1 contract could be a call option for 100 stocks/shares

it is good to purchase options for 2 year periods (which cost a bit more)
  as the monthly, weekly call options may not be exercised at all

so 1 scenario:
   Acme Inc current ask price=$110 and bid price=$120
     so I sell 1 put contract for acme w/strike price=$100
           (meaning I get the put premiums immediately/definitely)

if the Acme stock price goes down to $100, I MUST purchase 100 shares!

The next day, I could purchase a "call" option for a strike price of $130.
   (meaning, I am willing to sell if the Acme shares go up to $130)
     ...regardless if they stock continues to go up, I MUST sell those at $130
          ...thereby capping the amount I would have made


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