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Strategies & Market Trends : ZenWarrior's Trading Paradise -- Ignore unavailable to you. Want to Upgrade?

To: p40warhawk who wrote (369)	4/4/2001 7:16:14 PM
From: manfmnantucket	Read Replies (1) \| Respond to of 2462

p40, whoa whoa whoa! >I don't believe you can buy a stock from or sell a stock to Zen or me. You, and we, have to deal with the market maker (who would be Topps in your example). He determines what the Nomar card is worth We have some serious mythology going on here!! a) yes of COURSE we can make a transaction! I can meet you on Island right now and put out an offer and you can match it and we'll have our deal. My offer has to be the best bid or yours the lowest Ask to get displayed. Any brokerage/MM is required to display our offers if they are the best. The example simplified things to an extreme of 3 market participants to make clear what happens. If you multiply by millions, and change the cards to show companies instead of ballplayers, you have the NASDAQ stock market, almost exactly. Many more market participants impact the price, so it won't jump around as much as in my example. b)the market maker (who would be Topps in your example Actually, Topps/Nomar would be the equity, and there could be many market makers - e.g., a shop that stocks sports collectibles. The price is set mainly by buyers and sellers, though, after the initial offering by Topps. c) The "moral" factor comes into play when you sell Zen the card for 8 dollars when you have good reason to believe it is not worth that much. But he has reason to think it's worth that and more, obviously. We are each acting on information we interpret differently. In the example, my "short" was based just as much on the guess that the room had run out of money - Zen could have known otherwise. What about when I paid you less than I believe it's going to be worth? The same situation applies - I am acting on a belief that the price will go up. You are seeing the same info but think the price I offer is high enough - so you may take the loss selling and I profit. Is that immoral? Please indulge me here, because I think this is an important example that gets at a lot of the myths people have about stocks. It exposes the notion of value and shows how it's a zero-sum game. Apart from the number of participants, the mechanics are identical - and I haven't seen a real challenge to this claim yet. MfN