- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
Question about how stocks work?
Posted on 6/23/20 at 9:25 am
Posted on 6/23/20 at 9:25 am
If a company goes public and issues say 10 stocks. Maynard and Percy purchase 5 stocks each. Now, Chester purchases 4 stocks. Where did those 4 stocks come from? I know it makes the price go up.
Posted on 6/23/20 at 9:28 am to Cycledude
In your simplistic example. If the company only issues 10 shares of stock, and all 10 shares are purchased.
Chester would not be able to purchase 4 shares, he would have to wait till someone is willing to sell him a share.
Now if the company wanted to issue 4 more shares of stock to allow Chester to buy. That would actually decrease the value of the stock due to dilution.
Chester would not be able to purchase 4 shares, he would have to wait till someone is willing to sell him a share.
Now if the company wanted to issue 4 more shares of stock to allow Chester to buy. That would actually decrease the value of the stock due to dilution.
This post was edited on 6/23/20 at 9:29 am
Posted on 6/23/20 at 9:28 am to Cycledude
there has to be a seller for every buyer. you cant create more shares unless the company makes those shares public
Posted on 6/23/20 at 9:28 am to Cycledude
quote:
Question about how stocks work?
They always go up
Posted on 6/23/20 at 9:30 am to UltimaParadox
I’ve never heard of someone not being able to purchase a stock, or having to wait for them to become available?
Posted on 6/23/20 at 9:34 am to Cycledude
quote:
I’ve never heard of someone not being able to purchase a stock, or having to wait for them to become available?
That is because most companies share counts are above millions of shares. Typical trading volume of larger companies can easily get in the millions per day.
Most people buying and selling stock are trading large companies.
Posted on 6/23/20 at 9:34 am to Cycledude
quote:
I’ve never heard of someone not being able to purchase a stock, or having to wait for them to become available?
because in the real world, most stocks have enough trading volume to allow anyone that is interested to be able to purchase what they want.
In your example, there is no trading volume because all the outstanding shares are owned and no one is willing to sell.
This post was edited on 6/23/20 at 9:35 am
Posted on 6/23/20 at 9:43 am to Cycledude
quote:
I know it makes the price go up.
You really don’t know. Lol
Posted on 6/23/20 at 9:46 am to iAmBatman
quote:So, I a sense you’re saying there is almost always unpurchased stocks floating around. I’m still confused because I thought more buyers than sellers was what drove the price of stock up?
because in the real world, most stocks have enough trading volume to allow anyone that is interested to be able to purchase what they want.
Posted on 6/23/20 at 9:48 am to Cycledude
quote:
So, I a sense you’re saying there is almost always unpurchased stocks floating around
Negative
quote:
I’m still confused because I thought more buyers than sellers was what drove the price of stock up?
Supply and Demand basically, in the most simplistic terms
More people wanting to buy then sell, then the price goes up.
More people wanting to sell then buy, then prices goes down
Posted on 6/23/20 at 9:50 am to Cycledude
quote:
I know it makes the price go up.
This is wrong. It could go down. It could stay the same. Depends what the market price is.
Most stocks there are thousands of transactions every day. You put in a bid (a price you will pay) and the market which is now a computerized system, will look for buyers willing to sell their stock at that price. The price fluctuates constantly based on these transactions. The company itself only makes money based on the initial selling of the stock.
Posted on 6/23/20 at 9:54 am to Cycledude
quote:
So, I a sense you’re saying there is almost always unpurchased stocks floating around. I’m still confused because I thought more buyers than sellers was what drove the price of stock up?
When he says volume it has to do with the amount of transactions and that has to do with the amount of people willing to sell their stock. Think of it as a used car. There are hundreds of thousands of 2018 F-150's in America, but only a few thousand are likely for sale at anytime. That's what creates trading volume. If the stock "isn't" for sale then it reduces the volume of possible transactions and the price can then get volatile or difficult to predict.
This post was edited on 6/23/20 at 9:56 am
Posted on 6/23/20 at 9:56 am to Cycledude
Barry covered it.
This post was edited on 6/23/20 at 9:57 am
Posted on 6/23/20 at 10:22 am to Cycledude
quote:
If a company goes public and issues say 10 stocks. Maynard and Percy purchase 5 stocks each. Now, Chester purchases 4 stocks. Where did those 4 stocks come from?
maynard and/or percy
Posted on 6/23/20 at 10:34 am to Upperdecker
quote:
Stocks only go up
Stonks only go up
Posted on 6/23/20 at 10:44 am to Cycledude
Stock prices go when people are willing to pay more for a stock than the current price. It's a very simple bartering system. We use the term supply and demand meaning that if the supply is lower than the demand people will pay more for it than it's worth. That is why stock prices go up or down. If people really want to sell it then they are willing to sell it for less than it's worth. That's why a stock price goes down.
The amount of stocks are normally unchanged, unless a company issues more stock. People will put in an order to buy or sell. The seller holds onto the stock until they are sold. So I can put in a sell order at $10 but I own them until someone says they are willing to buy at that same price. If no one is willing to buy I may drop my price to $9.90 and then maybe someone is willing. That is how we track prices of stocks.
The amount of stocks are normally unchanged, unless a company issues more stock. People will put in an order to buy or sell. The seller holds onto the stock until they are sold. So I can put in a sell order at $10 but I own them until someone says they are willing to buy at that same price. If no one is willing to buy I may drop my price to $9.90 and then maybe someone is willing. That is how we track prices of stocks.
Posted on 6/23/20 at 11:28 am to Cycledude
also Market Makers help guarantee there is always a "market" to buy or sell many stocks
Posted on 6/23/20 at 12:33 pm to Cycledude
quote:
So, I a sense you’re saying there is almost always unpurchased stocks floating around. I’m still confused because I thought more buyers than sellers was what drove the price of stock up?
This is basically true, though it’s a bit more complicated than that. A better description would be “there is always a price high enough for someone to sell, and there is always a price low enough for someone to buy.” The bid price of a stick is the highest published price someone is willing to pay to buy a share. The ask price is the lowest published price at which someone is willing to sell. The bid-ask spread is the gap between the bid and ask prices. The last or ticker price is the most recent price at which a trade was executed. When you look at a chart of stick prices, you are looking at a chart of the last (or more accurately, close) price of each period represented in the chart. For example, a 3-month chart on the iPhone stocks app will show you daily closing prices.
Bid-ask spreads are important to your question, I think, because they are a measure of liquidity. For example, imagine you buy a parcel of land. The seller wanted $110,000 (ask), you initially offered $90,000 (bid), but you settled on $100,000 (close). How much would it take to make you turn around and sell that land immediately? Let’s say that number is $120,000 - that’s the new ask price. How much would a potential buyer be willing to pay to buy the land immediately? $90,000? That’s the new bid. This is an example of a lack of liquidity. Maybe you can sell it for $110,000, or $120,000.. but it’s going to take time. If your parcel of land were a stock, its ticker price would not go up until you sold it. If the land appreciates in value, the bid and ask prices might both go up but there will still be a gap.
Contrast this with highly liquid stocks with millions of shares traded daily. The bid-ask spread for NVDA is currently 9 cents on a $384 stock. If you buy a share at the ask price and good news drives the bid and ask prices up even 0.1%, you can sell at the bid price and still turn a profit. This is a highly liquid investment.
In reality, orders get filled between the bid and ask prices all the time because “market makers” add liquidity to the market. But the orders will always be filled between the bid and ask prices. In your example of a company issuing 10 shares, the bid-ask spread would likely be pretty large. The bid and ask prices could both go up or down considerably without a trade being executed, meaning the stock would appreciate or depreciate in value without any change seen on the traditional stock price chart.
Popular
Back to top
Follow TigerDroppings for LSU Football News