InvestorsHub Logo
Followers 1
Posts 79
Boards Moderated 0
Alias Born 08/10/2010

Re: jimmowrey post# 31018

Tuesday, 10/02/2012 1:32:45 PM

Tuesday, October 02, 2012 1:32:45 PM

Post# of 52841
Market Makers must be compensated for the risk they take; what if he buys your shares in IBM then IBM's stock price begins to fall before a willing buyer has purchased the shares? To prevent this, the market maker maintains a spread on each stock he covers. Using our previous example, the market maker may purchase your shares of IBM from you for $100 each (the ask price) and then offer to sell them to a buyer at $100.05 (bid). The difference between the ask and bid price is only $.05, but by trading millions of shares a day, he's managed to pocket a significant chunk of change to offset his risk. Not sure where you got your info from.