** TLWN TRADING UPDATE: Notice that the MM's widened the spread a little while ago to .29 x .32 Why?
Well, first off, that is not a wide spread at all for a BBstock, so this is not a great example, but still indicative of what the MM's may be doing over the next few hours or days in the way of manipulation or game playing. (see SETO info below for an example of a ridiculous spread)
IN GENERAL...
MM's will generally widen the spread to slow down activity in a stock. If a stock is about to get a lot of buying for instance or is currently getting a lot of buying, and they don't want to "get away from them", they will try to dissuade some from buying by making the spread wider.
Sometimes, not always, they will still take less than the ask if you offer it to them. If they just had the stock at .29 x .31 and they don't take say 31 cents after raisng the B/A to .29 x .32, then that probably means that they will be raising the bid soon, since if the real bid is .29, then there is no reason they should not take .31, since they were taking it before.
They also like to see how strong the buying is, by seeing if people will pay a little more. If people do, then they are also likely going to raise the bid.
When they raise the bid, they will also be seeing how many will sell, so by playing these little cautious games they determine real interest.
MORAL #1: don't let a wide spread dissuade you from buying. Just put in a limit order for a penny or so under the current ask. This works best if the stock is not currently moving up
CAUTIONARY NOTE THOUGH: If you really want to buy a stock and feel it is about to go up, do not get too greedy. Your limit order just below the bid may not fill. I have tried that game in the past, trying to buy a stock that is moving just below the current ask, and I kept chasing it.
MORAL #2: If a stock is running or about to run, you may have to not only pay the current ask, but if running, you may have to pay above the current ask. Just depends on how bad you want the stock when it is running. I rarely chase.
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If you look at SETO, it is .44 x .55, very wide and ridiculous spread. That is real treachery and they really want to slow down buying and hopefully wear people out. It won't last forever and I doubt many will sell that stock for 44 cents. I also noticed on Level 2 that they did take some orders at 51 cents, but not many.
When SETO gets news, it will go up.
THe real bid/ask is probably 46 x 52. You can always test it by seeing if they will take more or less with small orders.
The slower the volume, the more the MM can and will play games like that.
PS-- SYCD MM's will almost always take a penny or two less than the current ask. |
