Series 7 Exam Prep Free ( Bid And Ask ) (2023)

Introduction

You definitely need to know the difference between Bid and Ask for the Series 7 Exam. This topic seems to give people some real trouble on the Series 7 Exam. Hopefully, this will help.

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Content

Hey, this is tim finnett and kevin of any shooter it's time for another way to advance rundown unbid versus so to pass the series 7 exam and the sie exam you will need to know the difference between a bid and an ask in a nutshell before I even do the little pictures bid is where people want to buy it ask is where people want to sell it.

So if you want to buy it, you have to buy it where people are willing to sell it.

Right? I mean, that makes sense you can't, buy it when no one's willing to sell it so that's, why they always say buy it.

They ask and sell the bid it's, easy stuff.

Let's get going.

Okay.

So here's, just a basic let's, put this over here, make it look good catch tutoring.

My company let's say, it went public.

And these are mm is market.

Makers.

Market makers are broker dealers that their job is to bid, an offer all day in a certain stock.

They have a lot of rules, which don't have to worry about this on this exam.

The main rule you do have to know is that if you're a market maker in a stock, you have to be publishing quotes to buy and sell reasonable to the inside market within like four percent of the inside market, all at all times from 9 30 a.m to 4 p.m, that's, that's, your main rule and minimum of 100 shares if it's on an exchange like nasdaq.

Now, the bid is where people want to buy it.

And they ask is where people want to sell it.

So here are the bids.

You know, we have market maker, a bidding, 2510 market, maker, b, bidding, 2508, market, maker, c, bidding 2501.

So which one of these do you think has the best chance of buying stock who wants to be the most aggressive.

Yes, you're, right.

So this is the highest bid so that's, one of the things of the inside market is the highest bid.

And the other side is the lowest ask so we're going to do the same thing, which one of these is it.

This one this one or this one, you guessed it, it's.

This one, okay.

So that's, the lowest ask so the inside market is now 2510 by 2540.

So this is the highest price at this snapshot in time right now that anyone's want to pay and that.

This is the lowest price.

Anyone is willing to sell at this moment in time.

Doesn't mean, two seconds later could change.

But right now, this is the inside market.

So if you want to buy stock, you can buy it from people willing to sell it and they're willing to sell it at 25.40 so that's, where you buy it.

If you want to sell stock, we can sell it where people want to buy it.

So you have to sell there.

I mean, think about it.

So if you entered an order to buy 100 shares, I mean, I didn't put prices in here.

Yeah, I mean amounts in here, yep, but I will buy 100 shares at 25 30.

Okay.

So let's think about this.

So let's think about this.

You walk into here and say, I want to buy a hundred shares and I'm willing to pay 25 30.

Okay.

So they the computer goes.

Okay.

25 30 is what you're willing to pay.

We look, no that doesn't work, no that doesn't work and no that doesn't work.

So there's, no one willing to sell it at your price.

But you can't, buy it, but you're now, the best bid, which means anyone who wants to sell, it will come to you first because you're higher than any of these.

So let's say, you sent this order to market maker c.

They would update your quote and say, okay, we have viewer want to pay 25 30.

So now that's the that's, the new best price.

So this will go down here.

And now our inside market is now 25 30 by 25 40., it's, just tightened up a little bit still nothing's happening.

So if you want to buy it, you still have to pay 25.40.

And if you sell it, you still have to sell it at 25 30., that's, the inside market that's, most of it.

Now, the market makers, they always say, the market makers, buy at the bid and sell the esq it's, not that they get to violate the rules it's that they're more likely to buy because they're sitting there posting that they'll want to pay this price.

So market maker c is the most likely person to buy stock, because they have the highest price out there, they're, saying, hey, I'm willing to pay 25 30 and that's what we're doing.

And these are all limit orders.

Okay, because a market order would just get executed against either the offer if it's a buy or the benefits of sell that's, all it is it's.

Nothing crazier than that.

It's, actually, very simple.

Now, let's let's change it up.

So we have the inside market.

Okay.

So this is what a level.

One would look like a little bit I'm, gonna change it up and show you what it really looks like.

But so this is showing the inside market.

This is showing the highest bid.

And the lowest ask it's, not saying who it is it's, just telling you that though it's there.

Now these numbers down here, this tells you how many shares are wanted in this case, it's, 500 but guys, it looks like five, no because it's five round, lots.

Each round is 100 shares.

So this is really 500.

Okay, that's really for 500 shares.

We it's just quicker to write it.

The other way.

Now this one you add two zeros onto it.

So this is really for a thousand shares or 10 round knots.

So if you want to buy stock at 40, you can buy up to a thousand shares at 25.40.

And if you want to sell stock at 25.30, you can sell up to 500 shares there.

Now, if you want to buy more than that, you can try, and maybe this person offering will do it.

And and understand something this may be more than one person offering.

This could be five people offering 200 shares each.

They just aggregated.

This could be, you know, one person doing 300 and one person doing 200.

on the inside market also known as the nbbo, which is what you'll see with a level.

One you don't know, who's bidding or offering, you just know that that's how much is wanted at that price.

This could be this could be one offer or ten.

This could be up to five really the most you could have is five because the minimum is 100 shares that's bid, an ass that's the inside offer.

Now we talk about level, one level, two level, three level, one.

This is how quote will look.

Okay.

So this is a level.

One quote, it shows you the name of the company, the bid, the ask the bid amount the offer amount so this, if you remember from the previous one, this would this is representing this 25 30.

bid for 500 and a thousand offered at 25 40.

So really it's, almost like you're, just taking this and placing a bow here.

This x just means buy so this.

This represents this bid.

S, always remember bid, ask as your, um bid, ask or bad ass to remember the bid ass order this is telling you how much it's up or down since the close.

So if they ask, you say, if it's let's, oh, let's, put a last in here, let's say, it's trading at 25, 31 let's just say it did say the last sale is 25 31, and it says, it's up by a nickel.

That means it closed.

I can't hope we can do the math right? It closed at 25 26 last night so it's up, six, five cents since the close last night.

And this is the volume on the day, how many shares have traded on the day that's level? One, okay.

So this is a level.

Two level, two looks like this see here's, the stock here's, the last sale, here's, the how many buy orders now down here level two is different than level one because it shows you all the people bidding and offering arca philadelphia.

Edgar batts, new york stock exchange, timber, susquehanna morgan stanley or goldman for first boston maxim.

These the left side are all the bidders.

Look all these things here, all the bidders they're buying you have, however, many shares say, it's, ten thousand, eleven thousand.

It keeps changing.

But this number up here is adding up all these numbers at 39 43.

This is the bid side over here we're showing that right.

It keeps changing because these are all the offers at 44 cents.

So the bid is 43 the offer is at 44.

So this is, this is changing to show you how many shares are offered.

But you see that it doesn't tell you who's offered it just tells you how many this part tells you who's offering up here.

The level one just shows you how much at a certain price and then level one, again only shows you the how much at the immediate highest bid lowest ask level, two, you get to see all the other prices all the way out.

And you get to see his offering over here down here.

These are all the trades.

This is called the tape as you're seeing it happen.

All these little codes mean, a bunch of different things.

Okay.

So this this shows you how high it is on the day, how low it's on the day stuff like that, the the percentage between the spread between the bid and the ask that's all this is showing so level two shows you the all the buyers at all.

The prices level two shows all the sellers at all the prices.

Then we have level three, which is for market makers, which allows the market makers to enter quotes like, you know, here like down here, maximum they're bidding, you know, 3634 and offering it 42.66 they're, pretty far away from the market, but they they actually their machine will have a little thing that says enter quote, update quote, and they can actually put quotes in and change the markets.

So there that's most of it that is the quote system that's, the um that's, the different levels that ask, I hope that helps if you have any questions, please leave a comment and I'll try to do more.