Thursday, December 15, 2011

Why would anyone invest in a company that has a large bid and ask spread?

It's an automatic loss because if the ask price is extremely higher than the bid price...when you buy it it has to surp the bid price when you place that amount to be sold...if it takes a loss, it goes even further down...meaning you've lost almost twice the amount of money you've invested right away. Also, I'd never invest in a stock like this if the volume was extremely low as well. Example: $25.32 per share, bid price $21.43 and ask price is $25.90 with a volume of about 4,500. This stock is a loser already and they're basically trying to penalize the investor for their poor performance, losses, debt, etc. Whatever the case may be.

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