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Conference nyoss1::market_investing

Title:	Market Investing

Moderator:	2155::michaud

Created:	Thu Jan 23 1992
Last Modified:	Thu Jun 05 1997
Last Successful Update:	Fri Jun 06 1997
Number of topics:	1060
Total number of notes:	10477

728.0. "What exactly does "offered at" mean?" by MILKWY::JSIEGEL () Thu Jun 02 1994 13:10

    Does anyone know exactly what "Bid" and "offered at" means when
    checking an option quote?  I thought I knew...that bid is what someone
    has offered to buy the option at, and "offered at" is what someone
    looking to sell the option is asking for the option.  Therefore I
    assumed that if a current quote was
    	
    	Bid:	1 1/8
    	Offered at:	1 3/8
    
    and I put in a sell order for 1 1/4, then the next quote I checked
    should show a new "offered at" of 1 1/4 instead of 1 3/8.
    
    I just did this, and in getting the quote from Fidelity touch-tone the  
    "offered at" price didn't change.  I spoke to a representative, and he
    said that the "offered at" price quoted is not what an individual is
    offering to sell it at, but rather what traders on the floor will sell
    it for.  This seems wrong or illegal to me...it looks like the traders 
    are trying to make extra profit, possibly at my expense.  They will sell 
    my options for 1 3/8, credit me for 1 1/4, and pocket the difference. 
    Could this be the case, or am I missing something?

T.R	Title	User	Personal Name	Date	Lines
728.1		ZENDIA::FERGUSON	You'll never get out of this maze!	`Thu Jun 02 1994 13:12`	19
	re <<< Note 728.0 by MILKWY::JSIEGEL >>> -< What exactly does "offered at" mean? >- > > Does anyone know exactly what "Bid" and "offered at" means when > checking an option quote? I thought I knew...that bid is what someone > has offered to buy the option at, and "offered at" is what someone > looking to sell the option is asking for the option. Therefore I > assumed that if a current quote was > > Bid: 1 1/8 > Offered at: 1 3/8 bid is the price someone has put to the market for the option, ie, what they are willing to pay for the security. the offered at price is the price somene is willing to sell the option for. the difference is the spread.
728.2	Thanks, but that doesn't unconfuse me...	MILKWY::JSIEGEL		`Thu Jun 02 1994 13:17`	7
	re .1 That is what I thought, and tried to explain in my base note. But doesn't that mean that the "offered at" price should have changed to the 1 1/4 that I was offering to sell at? Jon
728.3		WEEKS::HALLYB	Fish have no concept of fire	`Thu Jun 02 1994 14:34`	12
	I've seen this happen with Fido, too. If you're trading less than 10 contracts, I don't think they'll post your price because options exchanges guarantee a 10-lot can be traded at the bid and ask (barring extraordinary circumstances). If your option trades on the CBOE you can ask them to "book" your order, which the CBOE guarantees will trade before any floor traders trying to execute similar orders. This costs your broker some money, though, so they may push back. I don't think they HAVE to book orders. John
728.4		MRKTNG::BROCK	Son of a Beech	`Fri Jun 10 1994 10:32`	7
	On stocks (and options and etc) traders make their money two ways. One is commission on the sale - this goes to the broker. The trader makes his(her) money by buying at the bid and selling at the offer. So if a stock has a bid of 1.5 and an offer of 2.0, you the holder of the stock will sell to the trader for 1.5 and the trader will sell it to the next buyer at 2.0 (spread increased in this example to make a point).