What are the general scenarios that can happen with a stock when the Bid and Ask price marginalize at an exponential distance from each other the entire day? Example NYER:
Beginning of the day: BID 2.65/ASK 2.74 Market Price 2.70
Middle of the day: BID 2.70/ASK 2.83 Market Price 2.80
Closing Bell: Bid 2.80/ASK 3.20 Market Price 2.90
Can someone tell me what is happening here?
I hold 300 shares of this stock which I bought at 2.70, should I sell now and take my small profit or should I hold and see if the market price will reach that ASK?
Posted by Art on :
Buyers and sellers, as well as market makers, have strong but divergent opinions as to the value of the stock, and are on strike. More likely on low volume trades.
Eventually someone gives in and goes for a middle sell (ask) or buy (bid) to bridge the gulf.
Posted by Moon Pie on :
This is an instance of the MMs taking a stock hostage until it begins trading at the bid, or at the ask, whichever is more beneficial to the MMs.
Posted by metal1 on :
the majority of the time a large spread is a result of a small float(which is the case with NYER)