Stephen,
A brief follow-up to Todd's answer to your question (with which I concur.)
The individual investor has more weapons with which counteract the bid-ask spread than in the past. Relatively new rules regarding the representation of NASDAQ limit orders mean that if, say, LUFK has a 28/29.5 spread, and you put in an order to buy at 28.5, you will "move the spread" to 28.5/29.5 (provided your broker gets your order represented adequately, and that your order is at least 100 shares. There are other issues here, which I'll leave to others more knowledgeable than me.)
Even better: if one is patient and only trading small lots (say, 100-1000 shares) one can often use the spread on thinly traded stocks like LUFK and to work in their favor by, in effect, competing with the market makers on a stock. One just buts in a buy order very near the bid, or a sell order very near the ask, and waits to get filled. It won't always happen, but I've found that in a surprising number of cases, it does. (Some folks have make reportedly made a decent living at this by doing it full time--a web search for "SOES bandits" will likely turn up some interesting reading on this.)
Hope this brief addenda was useful.
Regards,
Dave |
