What is the Best Ask?
How Does the Best Ask Work?
Let's assume the shares of Company XYZ trade on the Nasdaq Composite Index and there are four makers for the stock. At the day and time you are considering placing your order to purchase Company XYZ stock, the are asking the following prices for the stock:
In this example,C, who is to sell the stock at $45 per share, has the best ask.
Now let's look at the ask prices for the fourof Company XYZ bonds:
In this example,D has the best ask because it is willing to sell for 99.25% of its .
Note in both examples that we have ignored ask size; the investor should consider the number of securities offered by the when evaluating prices. Also note that the current price of a security is the price at which it last changed hands; the best ask is the price at which a is currently willing to sell. The SEC requires brokers to their customers the best available ask price.
Why Does the Best Ask Matter?
Thepresenting the best ask usually receives the next order. This is important to day traders and other investors who trade very quickly -- delaying a trade by just a few minutes can expose the investor to the risk of completing the trade at a less favorable price.
The best ask is a component of the inside spread, which is the difference between the best ask and the best bid. Some traders and analysts purchase access to services showing all bids and ask prices on a particular security. Not only can this provide clues about a security's price trends, it may also indicate which of the makers has the most influence on a security's (these are called axes).
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