The Lemon Fool

How is the share's spread calculated?

Is is just the offer - bid price? e.g for XPP it would be

2540 - 2510 = 30?

Right?

And as % of the offer price 1.18%.

thanks, Matt

Applying the same logic to BOY

808 - 807.5 = 0.5

% of offer 0.06%.

Presumably this means that BOY trades with a much tighter spread than XPP. Which means that if I want to set limit buy orders slightly below their current prices, but only have cash available for one order, then I am much more likely to fill my BOY order than my XPP, because the BOY stock has much more liquidity.

Matt

Liquidity can be a function of volatility. So a wider spread reflects a share that "moves" more. Market makers factor into the spread that "moveability". So the liquid share with a narrow spread may remain where it is, and even an order a small distance away might not get filled. Whereas an order further away in price on a more volatile stock might get filled easier, and sooner.

Not sure I would be determining which share to buy from a choice of two alternatives on such a basis though.

dealtn wrote:Not sure I would be determining which share to buy from a choice of two alternatives on such a basis though.

Ha ha! Don't those spreads aren't my sole criteria. I've been doing a lot of research and analysis too!

Matt

dealtn wrote:Liquidity can be a function of volatility. So a wider spread reflects a share that "moves" more. Market makers factor into the spread that "moveability".

Is there anything on the public domain where I can access the relative "moveability" of share prices (or indeed volatility too)?

thanks Matt