bid 5.35 ask 5.75

G

Gordon Gekko

i don't daytrade much, so when it comes to order routing, i admit i'm not quite an expert. anyway, say i'm short a stock and i want to cover, but the bid is 5.35 and the ask is way above at 5.75. what's the best way to get out with maximum profit but also get filled? i'd rather get filled somewhere in the middle than go for every penny and have to buy higher later. i use datek direct, so i can route to isld, etc.

thanks!
 
The image of the proverbial Gordon Gekko using a Datek account. As relating to the movie, now that's funny.

Thanks for the morning laugh. :D
 
That's a tough situation. You are looking at a ~10% spread. If you must get out NOW, the only way to be sure of an exit is to get out NOW, by covering at the ask.

IF the stock is an exchange listed stock, you can send a bid order to the specialist somewhere in the middle of the spread, and you MAY get filled. Certainly, for Nasdaq stocks, you can send in a bid between the spread and hope for a possible fill. Based on the wide spread, I would certainly assume that this is not a very liquid stock, and so you are probably not likely to get filled quickly or at all on your limit order.

Hindsight is 20/20, but if you haven't already, you should consider this spread risk in your pre-trade analysis to determine whether the stocks potential rewards are worth playing with this stock that trades with a 10% spread.

Best of luck,
-Eric
 
With a spread like that, you wouldn't want to be daytrading that stock anyways....most hi vol. naz stocks have a spread of 1 cent.

Anyways, in this case you can do a couple of things:

1) Shave a couple of cents ahead of the next island Bid....I assume you have ISB.....display island bid or not...it depends on the characteristics of the stock and whether people often shave in front of you

2) Use INCA to shave a couple of cents ahead...or if you really want out, to cut the spread in half. The problem is no one will know if you are that shaved, and may not get filled as quickly as possible.

3) Ideally, you buy into weakness, having a posted bid a little higher than the level 2 bid, and can get a fill at such a price close to when the stock stops falling
 
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