Where to place limit order for illiquid stocks

[ajensen]

Suppose I must buy 1000 shares of an illiquid closed-end fund, BlackRock MuniYield New Jersey (MYJ), by the close. The current market at around 2pm is

14.45 x 1000
14.49 x 1400

I can place a limit order for 1000 shares at any price, but if I don't get filled by 3:45pm I will submit a market on close order for the unfilled amount.

Will I on average get a better overall price if submit a limit order to buy at 14.45, 14.47, or 14.49, keeping in mind that the remainder will be filled MOC? I need a model for the expected number of shares filled for a buy limit order at 14.45 and the expected MOC price for the remainder, and a model for the same quantities for a 14.47 limit order.

The general question I am trying to answer is how much of a reward is there on average for trading patiently with less-aggressive limit orders? The maximum possible benefit to placing the limit order at 14.45 rather than 14.49 is 1000*$0.04 = $40, but the actual benefit is smaller, because I may not get filled on 1000 shares at 14.45, requiring an MOC order for the remainder.

 

[FSU]

Not sure why you are calling this an illiquid stock. .04 wide, 1000 up seems pretty liquid to me. Assuming you buy at the mid point vs the offer, you are talking about a difference of $20 total. I would just put a 14.47 bid in, and if not filled right away go up to 14.48 then pay the offer at 14.49.

 

[zdreg]

Not sure why you are calling this an illiquid stock. .04 wide, 1000 up seems pretty liquid to me. Assuming you buy at the mid point vs the offer, you are talking about a difference of $20 total. I would just put a 14.47 bid in, and if not filled right away go up to 14.48 then pay the offer at 14.49.

you take that action the 14.49 offer will disappear as the mm knows he is dealing with an amateur. take the offer at 14.49 and give up drinking your bottle of wine for a day.

 

[FSU]

you take that action the 14.49 offer will disappear as the mm knows he is dealing with an amateur. take the offer at 14.49 and give up drinking your bottle of wine for a day.

Probably better advice than mine.

 

[ajensen]

you take that action the 14.49 offer will disappear as the mm knows he is dealing with an amateur. take the offer at 14.49 and give up drinking your bottle of wine for a day.

My impression from watching low-volume CEFs trade is that this rarely happen. If the market is 14.45-14.49 and I bid 14.47, the 14.49 offer remains.