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In a sense, I guess my question also asks something similar, which is :-
"Why, in pre-trading" (e.g. around 7-8am SA time), do I often see things like this :-
BHP - Bid $42, Offer $23. (volumes ignored for the sake of argument).
The numbers are way out of kilter with what the actual stock is 'supposed' to be worth from the previous day, e.g. closed at $30 recently.
What is the logic to this, people bidding high for stock and offering it at rock bottom prices ? It seems contrary to what you should actually do, plus, you could buy/sell it a few hours later for around $30. I would be really surprised if a stock like BHP moved so much so quickly in even a day.
If I see this, then put in a bid for say, 100 BHP at $23 and the volume will easily be matched by what is on offer, why does my order not go through at that price when the market opens ? Who buys these shares, or is it that the computer systems take an average of what people are willing to sell at, then works out the opening price based on that ? If it was not, it is open to someone buying BHP at $23 and then selling for a huge profit later that day.
It seems inefficient if the standard deviation / buy-sell spread is so wide. Imagine it as the bell-shaped curve of most investors selling around the 'norm' - $30 in the example above, with outliers at $23 and $40 and you'll understand where I'm coming from.
I don't understand the logic.
"Why, in pre-trading" (e.g. around 7-8am SA time), do I often see things like this :-
BHP - Bid $42, Offer $23. (volumes ignored for the sake of argument).
The numbers are way out of kilter with what the actual stock is 'supposed' to be worth from the previous day, e.g. closed at $30 recently.
What is the logic to this, people bidding high for stock and offering it at rock bottom prices ? It seems contrary to what you should actually do, plus, you could buy/sell it a few hours later for around $30. I would be really surprised if a stock like BHP moved so much so quickly in even a day.
If I see this, then put in a bid for say, 100 BHP at $23 and the volume will easily be matched by what is on offer, why does my order not go through at that price when the market opens ? Who buys these shares, or is it that the computer systems take an average of what people are willing to sell at, then works out the opening price based on that ? If it was not, it is open to someone buying BHP at $23 and then selling for a huge profit later that day.
It seems inefficient if the standard deviation / buy-sell spread is so wide. Imagine it as the bell-shaped curve of most investors selling around the 'norm' - $30 in the example above, with outliers at $23 and $40 and you'll understand where I'm coming from.
I don't understand the logic.
