[OT] Stock Market Newbie questions on trades of shares
Dominic77
Cleveland, Ohio
1. Say I want to buy a 1,000,000 shares (scale or magnitude might be off, but assume large) of some company. 1.a Would THAT MANY shares have to be available before I can buy them? 1.b. Do the shares come from other investors or the company itself?
2. Say I end up with 4,000,000 shares (or some large number) of the same company. 2.a. If I sell them, where do they go? Other investors? Back to the company itself? Or to some imaginary market flywheel that temporarily holds market volume/trades? 2.b. would such a trade “take time” and not be instantaneous?
3. Trading volume for billionaires 3.a. Could I end up in a scenario with 4,000,000 shares that I can’t unload because it’s an albatross? 3.b. Or it is a matter of I ask for $50.81 per share, then hours later someone offers $50.41 per share, and I decide to accept or decline?
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The bid prices were what prompted me to ask the question. I used to be under the impression that the current stock price was the price, period. But then I saw bids and starting thinking it was more fungible that that (and my earlier understanding was too simplistic).
Another thing that bounced around in my head. Say it was 2004 and bought AAPL for $8/share (like $4 million worth of it). Then I had to foresight to sell it end of 2007 near the high of $200/share (paying gains tax). Then again, I had the forsight to buy all of those shares back again at the 2008 low of $96/share. Then I head onto them until they got to $713/share a few years back (for the split) and sold those shares (paying gains tax).
Hypothetically you would be hella rich. I was just wondering if anything like that actually happens IRL.
SJG
As far as billionaires or multi. Millionaires go, a stock needs a lot of high volume liquidity to not shoot the price of the stock down or up by much.
Example shadowcat is selling his shares of tuscl at $5 a share and has 1000 shares for sell.
John69 puts in a buy order for 1100 shares for 4.95 a share.
Somehow close to these prices the stock would get bought and sold.
Now suppose lots of others have buy and sell orders like 5.50 a share 7 a share but the quantity is only a 1000 shares and they never thought they would get any buyers at that high a price.
Along comes millionaire juice saying he's going to buy a whopping 10,000 shares of tuscl and puts in a market order. To satisfy that order he buys up all available shares and the price of the stock might jump to $10 a share or some very high price to entice enough sellers to sell to juice. Without enough liquidity, you overpay. The opposite might happen if juice that the stock was a bad move and decides to put in a,market order to sell those 10,000 shares.
If someone put in market order for a billion shares for tuscl and I had some, I'd happily sell everything I had for $100,000 a share if the billionaire put in a market order and there weren't enough shares to fill the order without me selling mine. If I sold 1000 shares at 100K each, well that would make my day.
If you are making a stock go up or down, you may be a big part of the market for the stock.
I picked up a couple Warren Buffet books from the library (I went to initially get twentyfive's and Che's suggestions but they were out until 3/7/17 and still had hold infront on mine). Mr. Buffet mentions that he limits himself to investing in 10 companies. I was both surprised and not surprised to read that.
Problem with the way Warren Buffet trades is that you can't do the same as he does, he picks a company goes in to visit is escorted and shown around, than he negotiates a sweet deal for his 50meg or more, investment usually picking up a better deal than you or I could negotiate. He often gets preferred shares, a better dividend rate, sometimes a seat on the board, normal investors could never get the kind of perks that he will avail himself of. The only thing that you can do that is similar to the OoO is buy good quality stocks and hold for long term, he is not a trader he is usually a long term investor.
Referencing your question about dark pools
One thing to keep in mind buy too much and cause too much of a price shift on the major exchanges, you will trigger an alert that if the movement is larger than a certain size it can halt trading in a company or even suspend trading at least long enough for the SEC to take a look and be sure that you are not a manipulator. that is another reason to avoid penny stocks they are so small in market cap that a non accredited investor with enough cash or credit can manipulate them to cause price fluctuations that are abnormal.(manipulate price)
Don't subsidize the Warren Buffets of this world. Don't subsidize the Dougster's of this world.
SJG
It's nice to read that there are protections against stock trading price manipulation of market "whales." I figured it might be a problem to buy/sell a larger number of stock. I think i will stick to a diversified portfolio. It seems easier and not to mention safer.
The most interesting thing has been reading and learning about the specialists. It seemed like there was a fiction point and it makes sense that there would a person (or persons) to reduce that friction and enable liquidity. I blame my analytical mind.
SJG
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