If I own stock in a company listed on NYSE/NASDAQ and I want to sell it at whatever is the currently listed price, who buys it? Does the very existence of a listed price mean that there are outstanding offers to buy at that price? Are these “offers to buy” made for certain quantities of shares, with offers to buy additional quantities at higher or lower prices? Is that true for every stock listed on NYSE/NASDAQ? How about “penny stocks” and other non-listed companies?
I have certain stocks that I hold in DRIPs. When I want to sell, I just call the broker/company rep and say I want to sell x shares. They say they will sell them w/in a day. What do they do? Do they (or a broker) buy them and hold them for resale? Or do they just send a message out into the ether saying they are offering x shares at whatever the market rate is, and wait for someone to make an offer?
I’d appreciate any efforts to dispel my ignorance in this.
Essentially, buyers and sellers are matched. If you want to buy the stock at a particular price, then someone is found who wants to sell it at that price (I’m eliminating things like spread and commissions for simplicity’s sake).
What if there’s no buyer for the seller? Simple. Someone keeps a reserve of stock for this purposes. On the NYSE, it’s an individual called a “specialist”; on NASDAQ, it will be done by groups of brokerages who “make a market” in that stock. The specialist or market maker owns stock that they will buy and sell to keep the market flowing smoothly. They make money if they can sell their stock for more than what they paid for it, and lose it if they can’t, but a good specialist/market maker knows how to buy and sell to reduce the risk.
Your broker for an NYSE stock gets a message to the specialist for that stock on the floor of the exchange. He may already have offers in hand that he matches to your. If not, he will buy or sell the stock from his own account as necessary. NASDAQ is the same, but it’s done electronically by brokerage firms.
To add one bit: The price that’s listed is not neccesarily what you would buy/sell it at, it is the price of the last transaction made. In most cases, it’s virtually the same thing. But in stocks with very low volume, or when some event makes the price move very fast, you will be buying/selling at a different number.
No. there is no current price, only the last price traded. this is an important distinction.
If the stock has liquidity or reasonable turnover, then yes you can call at the current price. More accurately, you can sell at the bid price, aka “hit the bid.”
Unlisted stocks trade “over the counter” or in the OTC market. That is, NOT through an exchange. Basically, a buyer and a seller are matched up, and then trust this deal goes through. For a listed stock, the stock exchange actually guarantees that the trade takes place. If you sell a stock through a listed exchange, and the buyer can’t pay for it, well not your problem. The exchange or members of the stock exchange will pay for your stock and then figure out how to ensure the buyer actually buys it or sells it (and eats any loss) to a different buyer.
If there are rumours that a company is about to be taken over, the stock price may well suddenly rise.
Or if a drug company gets a license for a new, likely-to-be-popular drug, the price may shoot up.
If there is severe problem with an industry, the price of companies in that sector can drop swiftly.
You can also set the minimum price you are willing to accept for a sale and the maximum you are willing to pay for a stock. However, if you do this, there’s no guarantee the transaction will go through, plus other risks.
These are termed “stop orders” and “limit orders” (and even “stop-limit orders”), which are different from the usual “market order.”
What I suppose I really meant was this: Can the stock exchange refuse to buy my stock, assuming I don’t care about the price I sell it at? Can I be landed with a pile of totally unsellable stock, or are they obliged to purchase if I want to sell (again, assuming they set the price)?