Author Topic: Can someone explain bid/ask pricing (ETF)  (Read 18864 times)

notoriusjt2

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Can someone explain bid/ask pricing (ETF)
« on: June 22, 2015, 05:36:34 AM »
I am looking at a quote within my Roth IRA for Ishares core US growth ETF @ Fidelity

bid: $79.86
ask: $87.35

Does this mean that the lowest price available to buy these shares is $87.35? Once I purchase these shares they are still worth only $79.86. So I am loosing $7.49 per share right from the get-go? That seems crazy as the ETF would have to go up around 10% for me even to break even. Is this method of thinking correct?

Tjat

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #1 on: June 22, 2015, 05:50:58 AM »
That's an awfully big spread, but I think your interpretation is correct

Lordy

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #2 on: June 22, 2015, 05:53:25 AM »
Bid is the price that somebody is willing to pay.
Ask is the asking price that somebody is willing to sell for.

If you want to buy you will have to pay the "Ask" price.
That spread seems unusually big which shouldn't happen if there is even moderate trading going on. Where and when did you get these numbers?

MidWestLove

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #3 on: June 22, 2015, 05:58:17 AM »
Bid/Ask spread is the way to pay market makers for facilitating transactions in real time ('making the market')  - willingness to buy when no one is buying and willingness to sell when there are no sellers. market makers (also called specialists in the stock) required to make the trade and therefore provide liquidity.

Now, bid/ask spread during orderly market is generally very small, unless
- issue is thinly traded
-market is not actually opened
-both

check when/where that particular ETF is traded (NYSE?) and then re-check the bid/ask spread when the time when specific exchange is open.

fb132

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #4 on: June 22, 2015, 06:00:17 AM »
Bid is the price that somebody is willing to pay.
Ask is the asking price that somebody is willing to sell for.

If you want to buy you will have to pay the "Ask" price.
That spread seems unusually big which shouldn't happen if there is even moderate trading going on. Where and when did you get these numbers?
Actually, it happens quite often at the beginning of trading, I remember seing VXC (Vanguard's canadian ETF) opened at 1000$ asking price when the share was at 30$. Usually you have to wait about 30 minues to 1 hour after opening trading for the asking price to go to normal prices.

Mississippi Mudstache

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #5 on: June 22, 2015, 06:48:54 AM »
Bid is the price that somebody is willing to pay.
Ask is the asking price that somebody is willing to sell for.

If you want to buy you will have to pay the "Ask" price.
That spread seems unusually big which shouldn't happen if there is even moderate trading going on. Where and when did you get these numbers?
Actually, it happens quite often at the beginning of trading, I remember seing VXC (Vanguard's canadian ETF) opened at 1000$ asking price when the share was at 30$. Usually you have to wait about 30 minues to 1 hour after opening trading for the asking price to go to normal prices.

^This. Bid/Ask spreads are often in the neighborhood of several $ prior to trading, but once trading begins, they will quickly close to ~$0.01 for a highly traded ETF or stock. Check the spread again a few minutes after the markets open.

notoriusjt2

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #6 on: June 22, 2015, 06:52:03 AM »
Bid is the price that somebody is willing to pay.
Ask is the asking price that somebody is willing to sell for.

If you want to buy you will have to pay the "Ask" price.
That spread seems unusually big which shouldn't happen if there is even moderate trading going on. Where and when did you get these numbers?

I got those numbers off Fidelity's website just this morning around 07:30 EST

Looking at the quote now (08:50 EST) I no longer have a normal ask price... It just tells me these figures.
Bid: $81.50 x 2
Ask: $122.79 x 1

now I am confused

notoriusjt2

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #7 on: June 22, 2015, 06:54:21 AM »
Bid is the price that somebody is willing to pay.
Ask is the asking price that somebody is willing to sell for.

If you want to buy you will have to pay the "Ask" price.
That spread seems unusually big which shouldn't happen if there is even moderate trading going on. Where and when did you get these numbers?
Actually, it happens quite often at the beginning of trading, I remember seing VXC (Vanguard's canadian ETF) opened at 1000$ asking price when the share was at 30$. Usually you have to wait about 30 minues to 1 hour after opening trading for the asking price to go to normal prices.

^This. Bid/Ask spreads are often in the neighborhood of several $ prior to trading, but once trading begins, they will quickly close to ~$0.01 for a highly traded ETF or stock. Check the spread again a few minutes after the markets open.

So lets say I make a market order trade on Saturday when the bid/ask spread is $5. Then upon market opening on Monday the bid/ask spread is $1. Which bid/ask spread will I pay?

forummm

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #8 on: June 22, 2015, 08:00:08 AM »
Bid is the price that somebody is willing to pay.
Ask is the asking price that somebody is willing to sell for.

If you want to buy you will have to pay the "Ask" price.
That spread seems unusually big which shouldn't happen if there is even moderate trading going on. Where and when did you get these numbers?

I got those numbers off Fidelity's website just this morning around 07:30 EST

Looking at the quote now (08:50 EST) I no longer have a normal ask price... It just tells me these figures.
Bid: $81.50 x 2
Ask: $122.79 x 1

now I am confused

The market was closed at that time, so it makes more sense that the spread was huge.

Bid is the price that somebody is willing to pay.
Ask is the asking price that somebody is willing to sell for.

If you want to buy you will have to pay the "Ask" price.
That spread seems unusually big which shouldn't happen if there is even moderate trading going on. Where and when did you get these numbers?
Actually, it happens quite often at the beginning of trading, I remember seing VXC (Vanguard's canadian ETF) opened at 1000$ asking price when the share was at 30$. Usually you have to wait about 30 minues to 1 hour after opening trading for the asking price to go to normal prices.

^This. Bid/Ask spreads are often in the neighborhood of several $ prior to trading, but once trading begins, they will quickly close to ~$0.01 for a highly traded ETF or stock. Check the spread again a few minutes after the markets open.

So lets say I make a market order trade on Saturday when the bid/ask spread is $5. Then upon market opening on Monday the bid/ask spread is $1. Which bid/ask spread will I pay?

Be careful about making market orders without a limit. You will get screwed sometimes. You should *always* have a limit on your orders.

https://personal.vanguard.com/pdf/ISGETF.pdf

notoriusjt2

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #9 on: June 22, 2015, 08:06:01 AM »
Bid is the price that somebody is willing to pay.
Ask is the asking price that somebody is willing to sell for.

If you want to buy you will have to pay the "Ask" price.
That spread seems unusually big which shouldn't happen if there is even moderate trading going on. Where and when did you get these numbers?

I got those numbers off Fidelity's website just this morning around 07:30 EST

Looking at the quote now (08:50 EST) I no longer have a normal ask price... It just tells me these figures.
Bid: $81.50 x 2
Ask: $122.79 x 1

now I am confused

The market was closed at that time, so it makes more sense that the spread was huge.

Bid is the price that somebody is willing to pay.
Ask is the asking price that somebody is willing to sell for.

If you want to buy you will have to pay the "Ask" price.
That spread seems unusually big which shouldn't happen if there is even moderate trading going on. Where and when did you get these numbers?
Actually, it happens quite often at the beginning of trading, I remember seing VXC (Vanguard's canadian ETF) opened at 1000$ asking price when the share was at 30$. Usually you have to wait about 30 minues to 1 hour after opening trading for the asking price to go to normal prices.

^This. Bid/Ask spreads are often in the neighborhood of several $ prior to trading, but once trading begins, they will quickly close to ~$0.01 for a highly traded ETF or stock. Check the spread again a few minutes after the markets open.

So lets say I make a market order trade on Saturday when the bid/ask spread is $5. Then upon market opening on Monday the bid/ask spread is $1. Which bid/ask spread will I pay?

Be careful about making market orders without a limit. You will get screwed sometimes. You should *always* have a limit on your orders.

https://personal.vanguard.com/pdf/ISGETF.pdf

Thanks that PDF is very helpful.

So what is the reasoning for the bid/ask spread increasing when the market is not open?

forummm

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #10 on: June 22, 2015, 08:30:06 AM »
Thanks that PDF is very helpful.

So what is the reasoning for the bid/ask spread increasing when the market is not open?

There are fewer people trying to buy and sell. The spread narrows when more people are trading. They are competing with each other to make the transaction. And the market makers are willing to narrow the spreads when there's more activity. The risk they will have to hold a security for a long time goes down when the speed of transactions increases.

Mississippi Mudstache

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #11 on: June 22, 2015, 09:49:05 AM »
Be careful about making market orders without a limit. You will get screwed sometimes. You should *always* have a limit on your orders.

https://personal.vanguard.com/pdf/ISGETF.pdf

Yes. Bolded and repeated for emphasis.

forummm

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #12 on: June 22, 2015, 10:09:55 AM »
The bid/ask spread, inability to buy fractional shares, and inability to do auto-investing, are some of the reasons why I only own mutual funds and no ETFs. In general, ETFs are unnecessary for US investors. There are only certain limited cases where I would buy ETFs.

Mississippi Mudstache

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #13 on: June 22, 2015, 10:29:17 AM »
I find ETF's useful in my HSA which doesn't have enough money in it to get the best rates on mutual funds. When the account reaches a sufficient size, I will probably switch over from ETF's to mutual funds.

fb132

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #14 on: June 22, 2015, 11:49:17 AM »
The bid/ask spread, inability to buy fractional shares, and inability to do auto-investing, are some of the reasons why I only own mutual funds and no ETFs. In general, ETFs are unnecessary for US investors. There are only certain limited cases where I would buy ETFs.
As a canadian investor, mutual funds are way too expensive here. Even with the reasons you have mentionned, mutual funds are not worth it.

kendallf

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #15 on: June 22, 2015, 12:08:42 PM »
thank you OP for asking this question, and thanks forummm for the Vanguard PDF. 

I have been trading ETFs in small amounts (in a Roth IRA and an HSA) and never bothered to look up how this worked; I tend to look at this stuff at night and just put "market" in for execution, never realizing that the mechanics of implementation would tend to higher costs when the market opened the next day.  Doh!  I won't do that again.

seattlecyclone

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #16 on: June 22, 2015, 12:50:11 PM »
At any given time, there are a number of people who have unfilled orders in the market. Someone might have placed an order saying "I'm looking to sell 100 shares, and I want $100 for each of them." Someone else might say "I want to sell 200 shares for $101." On the other side, someone might say "I want to buy 100 shares for $98." The bid price is the highest price that someone is currently expressing an interest in buying shares for, and the ask price is the lowest price that someone is currently expressing an interest in selling shares for.

If you place a market order, you don't show up in this list. You're agreeing that you want to either buy shares at the current ask price or sell shares at the current bid price. You could end up paying even more than the current ask price: in the example above, there are only 100 shares available for $100. If you place a market order for 200 shares, you'll buy 100 shares from the person who is selling for $100, and the rest of your order will be filled from the person selling for $101. This is why limit orders are a good idea; you never know exactly what the price will be when you place a market order. Perhaps you see the ask price at $100 and are okay with that, but someone else grabs those shares before you place your order and you're stuck with paying $101 (or more).

The bid/ask spread is the difference between the current bid price and the current ask price. When the market is open and the stock or ETF is pretty popular, this spread will usually be small because people are constantly bidding the two prices closer together to complete a transaction. With a spread as large as you're reporting, that's a sign that there isn't much demand for trading right now, either because it's outside of the main trading hours or because the stock isn't very liquid in general. When comparing an ETF to a mutual fund it's important to consider the typical bid/ask spread because it tends to act as an additional fee when trading. Not so significant if you buy and hold for decades, but could be a tiebreaker if you're comparing against a traditional mutual fund with the same expense ratio.

forummm

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #17 on: June 22, 2015, 12:59:58 PM »
US ETFs are great for foreign investors.

During the flash crash, people who had market orders for ETFs unintentionally sold their ETFs for pennies on the dollar. Many of them never got that money back. Always use a limit.

notoriusjt2

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #18 on: June 25, 2015, 06:22:59 AM »
This morning I get a quote saying this...

Bid: 81.50 x 2
Ask: 87.08 x 1
Vol: 20


Ya'll have made it pretty clear what the bid/ask price represents, but what does the "x2 & x1" mean? Also, what does the "Vol" mean?


notoriusjt2

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #19 on: June 25, 2015, 06:26:06 AM »
The bid/ask spread, inability to buy fractional shares, and inability to do auto-investing, are some of the reasons why I only own mutual funds and no ETFs. In general, ETFs are unnecessary for US investors. There are only certain limited cases where I would buy ETFs.

Within my Roth IRA, Fidelity wants to charge me a trade/commission fee every time I purchase shares of a mutual fund. While contributing to this account monthly, I would have 12 total fees over the given year. ($7.95 * 12). Fidelity offers commission free trading of their IShares ETFs. That's the primary reason I am using an ETF in this instance.

seattlecyclone

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #20 on: June 25, 2015, 08:07:46 AM »
This morning I get a quote saying this...

Bid: 81.50 x 2
Ask: 87.08 x 1
Vol: 20


Ya'll have made it pretty clear what the bid/ask price represents, but what does the "x2 & x1" mean? Also, what does the "Vol" mean?



The "x2" is the number of hundreds of shares offered or requested at that price. "Vol" is trading volume, the number of shares traded so far today.

forummm

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #21 on: June 25, 2015, 05:13:01 PM »
This morning I get a quote saying this...

Bid: 81.50 x 2
Ask: 87.08 x 1
Vol: 20


Ya'll have made it pretty clear what the bid/ask price represents, but what does the "x2 & x1" mean? Also, what does the "Vol" mean?



The "x2" is the number of hundreds of shares offered or requested at that price. "Vol" is trading volume, the number of shares traded so far today.

Sometimes it's the number of hundreds. Sometimes it's the number of shares. Usually they trade in blocks of 100. This looks like an off-hours quote due to the huge spread. Could be the number of shares.

a1smith

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #22 on: June 27, 2015, 08:47:05 PM »
The bid/ask spread, inability to buy fractional shares, and inability to do auto-investing, are some of the reasons why I only own mutual funds and no ETFs. In general, ETFs are unnecessary for US investors. There are only certain limited cases where I would buy ETFs.

What are the limited cases?

forummm

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #23 on: June 28, 2015, 05:32:23 AM »
The bid/ask spread, inability to buy fractional shares, and inability to do auto-investing, are some of the reasons why I only own mutual funds and no ETFs. In general, ETFs are unnecessary for US investors. There are only certain limited cases where I would buy ETFs.

What are the limited cases?

If I really wanted a fund that didn't have a low enough minimum investment limit for the Admiral shares. Or if I were investing on margin (which I wouldn't do at Vanguard) or selling covered calls.

But I don't do any of these things.

marty998

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #24 on: June 28, 2015, 03:14:28 PM »
Market maker has to make a profit too.

The underlying ETF will have an actual unit price (released daily). During the day however, it's a bit of a guessing game as to what the actual value is.

Your buy orders will generally always be executed a little above the actual unit price, and your sell orders a little bit below actual unit price.

Lowerbills

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #25 on: June 29, 2015, 09:23:46 AM »
Currently (market is open)

VTI has a Bid/Ask spread of .01
BND has a Bid/Ask spread of .01
VXUS has a Bid/Ask spread of .03

There are plenty of highly liquid Vanguard ETFs (or others) with spreads of .01 or .02.  My advice, don't put orders out pre or post market on thinly traded ETFs.  Stick to small spreads during market hours.

And despite what others have mentioned above, you absolutely can "Buy" on the Bid and Sell on the ask.  You don't have to pay the ask price, you simply place a bid at your limit price; just know you aren't guaranteed a fill...

human

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #26 on: June 29, 2015, 06:57:42 PM »
This a great thread for a newbie like me. So what kind of limit do people set? Do you put a limit at the current bid price (lets say when purchasing Vanguard etf) and seem to always succeed or put it somewhere closer to the ask price?

forummm

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #27 on: June 29, 2015, 07:12:51 PM »
This a great thread for a newbie like me. So what kind of limit do people set? Do you put a limit at the current bid price (lets say when purchasing Vanguard etf) and seem to always succeed or put it somewhere closer to the ask price?

I don't buy ETFs, but if you put it at the ask price, you should get your order filled quickly. If you put it at the bid price, it may or may not get filled right away. If you put it halfway between them (if more than a penny of spread), it'll probably get filled before long.

a1smith

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #28 on: June 29, 2015, 07:18:10 PM »
Currently (market is open)

VTI has a Bid/Ask spread of .01
BND has a Bid/Ask spread of .01
VXUS has a Bid/Ask spread of .03

There are plenty of highly liquid Vanguard ETFs (or others) with spreads of .01 or .02.  My advice, don't put orders out pre or post market on thinly traded ETFs.  Stick to small spreads during market hours.

And despite what others have mentioned above, you absolutely can "Buy" on the Bid and Sell on the ask.  You don't have to pay the ask price, you simply place a bid at your limit price; just know you aren't guaranteed a fill...

Usually, if you do that, your limit order fills when the market price has either moved up/down a penny to match your limit price.  If the price doesn't move that way, it doesn't fill.

human

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #29 on: June 29, 2015, 07:19:26 PM »
Thanks for chiming in
This a great thread for a newbie like me. So what kind of limit do people set? Do you put a limit at the current bid price (lets say when purchasing Vanguard etf) and seem to always succeed or put it somewhere closer to the ask price?

I don't buy ETFs, but if you put it at the ask price, you should get your order filled quickly. If you put it at the bid price, it may or may not get filled right away. If you put it halfway between them (if more than a penny of spread), it'll probably get filled before long.
. Do people typically limit their purchase to that trading day only? If so can they fulfill part of your order only and then cancel the rest at then end of the day or will they cancel the whole order? The Vanguard pdf seems to suggest that when placing a limit they will fulfill as much of the order as possible then cancel the rest at the end of the trading day. I just to be sure I understand this correctly.

I probably would never be buying more than a few hundred shares at a time so I assume this shouldn't be a problem if I put it at the ask price.

a1smith

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #30 on: June 29, 2015, 07:22:36 PM »
This a great thread for a newbie like me. So what kind of limit do people set? Do you put a limit at the current bid price (lets say when purchasing Vanguard etf) and seem to always succeed or put it somewhere closer to the ask price?

I don't buy ETFs, but if you put it at the ask price, you should get your order filled quickly. If you put it at the bid price, it may or may not get filled right away. If you put it halfway between them (if more than a penny of spread), it'll probably get filled before long.

You can bid between bid/ask even if spread is one penny.  One penny is not the minimum increment.  A recently executed BNDX order of mine was priced at $52.13990

clifp

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #31 on: June 29, 2015, 07:24:38 PM »
This a great thread for a newbie like me. So what kind of limit do people set? Do you put a limit at the current bid price (lets say when purchasing Vanguard etf) and seem to always succeed or put it somewhere closer to the ask price?

If the bid and ask spread is $.01 I set it at the ask.
If the spread is > $.01 than I set it at $.01 below the ask.

Now sometimes the market goes against you and the order won't get filled that day. Perhaps 20% of the time that happens.  You can keep the order open (make a Good Til Cancel order) or set a new price the next day.  It is very rare that it takes more than 3 days to get an order filled with my strategy.

Now it is ok to use a market order (I don't) if the market is open and the bid ask spread is only a few cents. On a couple of hundred shares the price difference is only a few dollars for a long term buy and hold pretty irrelevant.  What you want to avoid doing is place market orders when the market isn't open or for thinly trade ETFs or stocks.

a1smith

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #32 on: June 29, 2015, 07:29:16 PM »
Thanks for chiming in
This a great thread for a newbie like me. So what kind of limit do people set? Do you put a limit at the current bid price (lets say when purchasing Vanguard etf) and seem to always succeed or put it somewhere closer to the ask price?

I don't buy ETFs, but if you put it at the ask price, you should get your order filled quickly. If you put it at the bid price, it may or may not get filled right away. If you put it halfway between them (if more than a penny of spread), it'll probably get filled before long.
. Do people typically limit their purchase to that trading day only? If so can they fulfill part of your order only and then cancel the rest at then end of the day or will they cancel the whole order? The Vanguard pdf seems to suggest that when placing a limit they will fulfill as much of the order as possible then cancel the rest at the end of the trading day. I just to be sure I understand this correctly.

I probably would never be buying more than a few hundred shares at a time so I assume this shouldn't be a problem if I put it at the ask price.

Usually your order will be filled.  With Vanguard, I've always had order filled with one buy/sell.  With TD Ameritrade I've had partial fills but even then the order was complete in 1-2 minutes at the most.  The end of day verbiage is CYA on their part.

Also, if the spread has settled down to a penny it is pretty safe to enter a market order.  Worst case, the market price bumps up a penny and you pay one penny more.  If you did limit order it wouldn't execute unless it trended back down again.

human

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #33 on: June 29, 2015, 07:32:37 PM »
Thanks to all replying to my questions. Sorry for hijacking the thread but this info is useful, it seems I don't have much to worry about.

FI40

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #34 on: June 29, 2015, 10:56:40 PM »
Thanks for chiming in
This a great thread for a newbie like me. So what kind of limit do people set? Do you put a limit at the current bid price (lets say when purchasing Vanguard etf) and seem to always succeed or put it somewhere closer to the ask price?

I don't buy ETFs, but if you put it at the ask price, you should get your order filled quickly. If you put it at the bid price, it may or may not get filled right away. If you put it halfway between them (if more than a penny of spread), it'll probably get filled before long.
. Do people typically limit their purchase to that trading day only? If so can they fulfill part of your order only and then cancel the rest at then end of the day or will they cancel the whole order? The Vanguard pdf seems to suggest that when placing a limit they will fulfill as much of the order as possible then cancel the rest at the end of the trading day. I just to be sure I understand this correctly.

I probably would never be buying more than a few hundred shares at a time so I assume this shouldn't be a problem if I put it at the ask price.

Usually your order will be filled.  With Vanguard, I've always had order filled with one buy/sell.  With TD Ameritrade I've had partial fills but even then the order was complete in 1-2 minutes at the most.  The end of day verbiage is CYA on their part.

Also, if the spread has settled down to a penny it is pretty safe to enter a market order.  Worst case, the market price bumps up a penny and you pay one penny more.  If you did limit order it wouldn't execute unless it trended back down again.

If I'm buying, I put my limit at a couple cents above the ask actually. Keep in mind it's a limit, so since there are standing orders at the ask I almost always get filled at the ask anyway. However, in the case where the market moves right after I see the quote and before my request is submitted to the exchange, I will still get filled if the price goes up a cent or two. Just saves me from getting possible partial fills, which can be really annoying.

Also, with my broker (BMO Investorline) I get level 2 quotes which allows me to see not only the number of lots (hundreds of shares) at the bid and ask, but all the other standing orders at other prices too. For thinly traded stuff, or for a really big order, you can see how far "deep" into the orders you need to go to get filled. It takes away some of the guesswork and I recommend getting this access if you can get them to give it to you for free (I think my broker has an asset minimum requirement for it).

a1smith

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #35 on: June 29, 2015, 11:14:04 PM »
If I'm buying, I put my limit at a couple cents above the ask actually. Keep in mind it's a limit, so since there are standing orders at the ask I almost always get filled at the ask anyway. However, in the case where the market moves right after I see the quote and before my request is submitted to the exchange, I will still get filled if the price goes up a cent or two. Just saves me from getting possible partial fills, which can be really annoying.

Also, with my broker (BMO Investorline) I get level 2 quotes which allows me to see not only the number of lots (hundreds of shares) at the bid and ask, but all the other standing orders at other prices too. For thinly traded stuff, or for a really big order, you can see how far "deep" into the orders you need to go to get filled. It takes away some of the guesswork and I recommend getting this access if you can get them to give it to you for free (I think my broker has an asset minimum requirement for it).

If you're concerned with partial fills you can make your order AON (all or none).  Maybe your broker supports it.  TD Ameritrade allows it. I found this webpage that discusses using TD Ameritrade's trading platform by Canadian self-directed investors; maybe you can use it.  TD Ameritrade also has L2 quotes; they are free, at least for Apex accounts.

clifp

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #36 on: June 29, 2015, 11:26:18 PM »
This a great thread for a newbie like me. So what kind of limit do people set? Do you put a limit at the current bid price (lets say when purchasing Vanguard etf) and seem to always succeed or put it somewhere closer to the ask price?

I don't buy ETFs, but if you put it at the ask price, you should get your order filled quickly. If you put it at the bid price, it may or may not get filled right away. If you put it halfway between them (if more than a penny of spread), it'll probably get filled before long.

You can bid between bid/ask even if spread is one penny.  One penny is not the minimum increment.  A recently executed BNDX order of mine was priced at $52.13990


I haven't found a retail broker that accepts orders in fractions of a cent. One of the scandals that was reveal in Michael Lewis book Flash Boys is that exchanges gave high frequency traders a variety of order types (beyond basics, like limit, market, all or none, fill or kill....) and the unique ability to make fractional penny bids and asks.

a1smith

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #37 on: June 30, 2015, 08:44:44 AM »
I haven't found a retail broker that accepts orders in fractions of a cent. One of the scandals that was reveal in Michael Lewis book Flash Boys is that exchanges gave high frequency traders a variety of order types (beyond basics, like limit, market, all or none, fill or kill....) and the unique ability to make fractional penny bids and asks.

I had not tried it before so I just gave it a shot.

Schwab
Quote
The Limit price you have entered is invalid. Please change this order and enter a valid price.
This stock is trading in decimals with a minimum price increment of 1 cent.

TD Ameritrade (with thinkorswim)
Quote
REJECTED: Orders above $1 can be entered in no more than 2 decimals; orders below $1 can be entered in no more than 4 decimals.

So, AMTD allows it but for penny stocks.  I won't be taking advantage of that feature.  :-)

Thinkorswim does have many different order types: market, market on close, limit, stop, stop limit, trailing stops;
with different time in force: day, am, pm, extended, good till cancel, good till cancel including extended;
with different instructions: all or none, fill or kill, none;
with different exchange routing: best, arca, nasdaq

That's just the specs for a single order.  You can also program sequential orders in very complex ways - a simple example is to have a buy order with a limit price and once that executes it sets up a sell order with a trailing stop.

I've used market, limit, stop, trailing stop with day, gtc.  I've never used AON or FOK and always route to the best exchange.  The only thing I've considered for sequential orders is the simple example I gave.

forummm

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #38 on: June 30, 2015, 10:16:25 AM »
I can avoid all this complication with my Vanguard mutual funds. On payday, the money just gets autoinvested at the market price, and I get the right amount of shares down to the thousandth of a share. I don't even have to login or anything.

a1smith

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #39 on: June 30, 2015, 04:58:03 PM »
We have three 401k's and two Roth IRA's on auto-pilot as well.  I use AMTD for after-tax and make <10 trades a year usually.  Not too much of a bother; just answering the question posed.

forummm

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #40 on: June 30, 2015, 05:01:00 PM »
We have three 401k's and two Roth IRA's on auto-pilot as well.  I use AMTD for after-tax and make <10 trades a year usually.  Not too much of a bother; just answering the question posed.

Just to be clear--no criticism from me. Everyone should do what works for them. Some people might even like being more hands-on. Just pointing out that the mutual fund way is pretty convenient for US residents.

human

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #41 on: June 30, 2015, 07:37:30 PM »
Being in Canada etfs are the only way to buy Vanguard . . . TD eseries is interesting but not sure how much the extra management fees would come out to over 2 or 3 decades.

FI40

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #42 on: August 04, 2015, 02:41:56 PM »
If I'm buying, I put my limit at a couple cents above the ask actually. Keep in mind it's a limit, so since there are standing orders at the ask I almost always get filled at the ask anyway. However, in the case where the market moves right after I see the quote and before my request is submitted to the exchange, I will still get filled if the price goes up a cent or two. Just saves me from getting possible partial fills, which can be really annoying.

Also, with my broker (BMO Investorline) I get level 2 quotes which allows me to see not only the number of lots (hundreds of shares) at the bid and ask, but all the other standing orders at other prices too. For thinly traded stuff, or for a really big order, you can see how far "deep" into the orders you need to go to get filled. It takes away some of the guesswork and I recommend getting this access if you can get them to give it to you for free (I think my broker has an asset minimum requirement for it).

If you're concerned with partial fills you can make your order AON (all or none).  Maybe your broker supports it.  TD Ameritrade allows it. I found this webpage that discusses using TD Ameritrade's trading platform by Canadian self-directed investors; maybe you can use it.  TD Ameritrade also has L2 quotes; they are free, at least for Apex accounts.

Yeah also known as Fill or Kill. I did look into that and unfortunately the TSX doesn't support that kind of order. It would be preferable though, that's great that you can do it on the US exchanges.

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #43 on: August 04, 2015, 03:42:28 PM »
My turn for a silly question.

How do you get a partial fill on an ETF? I get that it would happen for buying/selling other companies where you transact with other investors.

But for an ETF, units are not bought and sold between participants - they are created and destroyed by the market maker or provider....

Strikes me as odd that if the market price moves to your limit you would not get filled immediately in full...

brainfart

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #44 on: August 04, 2015, 04:47:45 PM »
Quote
How do you get a partial fill on an ETF? I get that it would happen for buying/selling other companies where you transact with other investors.

That's exactly what happens. You trade with others, not just the market maker.

Quote
But for an ETF, units are not bought and sold between participants - they are created and destroyed by the market maker or provider....

Let's assume someone trades 100 pieces of a fully replicating S&P500 ETF. Do you really think someone will then create or destroy those ETF units by buying or selling the underlying stocks? Very unlikely.


a1smith

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #45 on: August 05, 2015, 08:03:53 AM »
If I'm buying, I put my limit at a couple cents above the ask actually. Keep in mind it's a limit, so since there are standing orders at the ask I almost always get filled at the ask anyway. However, in the case where the market moves right after I see the quote and before my request is submitted to the exchange, I will still get filled if the price goes up a cent or two. Just saves me from getting possible partial fills, which can be really annoying.

Also, with my broker (BMO Investorline) I get level 2 quotes which allows me to see not only the number of lots (hundreds of shares) at the bid and ask, but all the other standing orders at other prices too. For thinly traded stuff, or for a really big order, you can see how far "deep" into the orders you need to go to get filled. It takes away some of the guesswork and I recommend getting this access if you can get them to give it to you for free (I think my broker has an asset minimum requirement for it).

If you're concerned with partial fills you can make your order AON (all or none).  Maybe your broker supports it.  TD Ameritrade allows it. I found this webpage that discusses using TD Ameritrade's trading platform by Canadian self-directed investors; maybe you can use it.  TD Ameritrade also has L2 quotes; they are free, at least for Apex accounts.

Yeah also known as Fill or Kill. I did look into that and unfortunately the TSX doesn't support that kind of order. It would be preferable though, that's great that you can do it on the US exchanges.

AON and FOK are not the same.

Quote
AON orders are similar to fill or kill (FOK) orders, but the former focuses on "complete vs. partial fulfillment", whereas the latter hinges on the immediacy of the transaction.

All or none - execute completely but no time constraint, you can have an AON order that is GTC (good till canceled)

Fill or kill - execute immediately (within seconds) and completely or cancel
« Last Edit: August 05, 2015, 06:37:30 PM by a1smith »

seattlecyclone

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #46 on: August 05, 2015, 09:39:20 AM »
But for an ETF, units are not bought and sold between participants - they are created and destroyed by the market maker or provider....

ETF shares can be created or destroyed by market participants who see an opportunity for arbitrage between the ETF and individual share price. However, much of the time the ETF shares are simply traded between two people without anything happening to the underlying securities, just like a stock.

hodedofome

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #47 on: August 05, 2015, 10:08:54 AM »
In Interactive Brokers today at 11:08am Central, IUSG gives me an ask of 83.96 and bid of 83.90.

RidinTheAsama

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #48 on: August 05, 2015, 11:50:21 AM »

Also, with my broker (BMO Investorline) I get level 2 quotes which allows me to see not only the number of lots (hundreds of shares) at the bid and ask, but all the other standing orders at other prices too. For thinly traded stuff, or for a really big order, you can see how far "deep" into the orders you need to go to get filled. It takes away some of the guesswork and I recommend getting this access if you can get them to give it to you for free (I think my broker has an asset minimum requirement for it).

I also do my trading through BMO Investorline.  Just hoping you can help me understand...
Here's the info I'm given:


ZCN(BMO S&P/TSX CAPPED COMP INDEX)   Real-time

$19.63            Bid: $19.63      Ask: $19.64
(up)0.02         Bid Lots: 17     Ask Lots: 10
                   High: $19.77    Low: $19.63
Last trade:      Vol:54,085       Tick:   -
13:17 ET


So, my questions:

When you say level 2 quote - is that the same as what I'm seeing or is there more info I could be requesting from them?

I understand the price, trend, bid, and ask... I think High, Low, and last trade are all pretty self explanatory as well...

Am I correct that Bid Lots are the number of units (in hundreds of shares?) that have been requested at that price?  And similar for Ask Lots being number of units offered at that price?

Is the Volume the number of shares or the number of Lots traded this day?

What's the Tick?

Sorry for the long list... any help understanding this is appreciated!

FI40

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Re: Can someone explain bid/ask pricing (ETF)
« Reply #49 on: August 14, 2015, 07:42:40 AM »
If I'm buying, I put my limit at a couple cents above the ask actually. Keep in mind it's a limit, so since there are standing orders at the ask I almost always get filled at the ask anyway. However, in the case where the market moves right after I see the quote and before my request is submitted to the exchange, I will still get filled if the price goes up a cent or two. Just saves me from getting possible partial fills, which can be really annoying.

Also, with my broker (BMO Investorline) I get level 2 quotes which allows me to see not only the number of lots (hundreds of shares) at the bid and ask, but all the other standing orders at other prices too. For thinly traded stuff, or for a really big order, you can see how far "deep" into the orders you need to go to get filled. It takes away some of the guesswork and I recommend getting this access if you can get them to give it to you for free (I think my broker has an asset minimum requirement for it).

If you're concerned with partial fills you can make your order AON (all or none).  Maybe your broker supports it.  TD Ameritrade allows it. I found this webpage that discusses using TD Ameritrade's trading platform by Canadian self-directed investors; maybe you can use it.  TD Ameritrade also has L2 quotes; they are free, at least for Apex accounts.

Yeah also known as Fill or Kill. I did look into that and unfortunately the TSX doesn't support that kind of order. It would be preferable though, that's great that you can do it on the US exchanges.

AON and FOK are not the same.

Quote
AON orders are similar to fill or kill (FOK) orders, but the former focuses on "complete vs. partial fulfillment", whereas the latter hinges on the immediacy of the transaction.

All or none - execute completely but no time constraint, you can have an AON order that is GTC (good till canceled)

Fill or kill - execute immediately (within seconds) and completely or cancel

Thanks for that - I wasn't aware of the difference! Turns out not only was I wrong about that, I was wrong about the TSX not supporting it. Apparently they do: http://apps.tmx.com/en/trading/order_types/ however, I don't think it's possible with BMO Investorline.