Wow Dnorman,
That is one heck of a spread between bid 1/2 ask 1 1/8. Generally,
the MMs will split the difference with you. Try 5/8s to give the MM a
1/8 profit incentive off the 1/2 if you are in a hurry. Otherwise,
just milk it down. Unless you think the stock will reverse on you.
The bid is what the MM is working off. The ask is what the street is
asking. With both bid and ask price the important data you need to
know is the size of the blocks on both sides of the spread.
Example, bid 1/2 (1,000) ask 3/4 (8,000) Price is moving up!
Think of the bid price as buyers and the ask price as sellers! With
that in mind, our example has 8,000 shares ready to sell at 3/4. The
movement is being forced upwards! Why? Because there are more blocks
of stock on the ask price so there are more sellers than buyers!
Thus, the price will eventually back off!
On the other hand, if you reversed the numbers to 8,000 at bid 1/2
and 1,000 at ask 3/4 the price will be forced downward. Why? Because
there are more buyers at the lower price than sellers.
The third element is the ticks which really tells you what is going
on. Up ticks followed by blocks of large stock purchases and a
gradual lowering in price is the sign for shorting. Usually, the up
ticks are 200 to 500 shares of bait followed by 2,000+ purchases.
They dummy up the price in order to short.
By the way! My 300 shares of CATP short position was covered at open
at $25 1/2. So, two days and $300 dollars profit. Not what I was
looking for. Hey, a profit is a profit! I'll take it! |
