Please explain "Bid" versus "Ask"
Prethen
Posts: 3,461 ✭✭✭
Okay, I know this should be easy to understand, but to put it simply....I don't. What exactly is the "Bid" value in the CDN and what is the "Ask" value? How do they function for real in the marketplace?
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Bid is what is being offered to pay
Ask is what is being offered to sell
So if bidders are at $500 and Sellers are asking $600 a trade will occur somewhere inbetween
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since 8/1/6
If a dealer posts a sight-unseen "bid", he is committing to purchase that coin (at his posted price, in the quantity stated) if another member of the CCE chooses to hit his bid/sell the coin to him.
If someone posts an "ask", they theoretically have the coin available to sell at their listed "ask" price if someone chooses to hit the ask price/buy it.
Bids are much more likely to be hit than asks.
If someone posts a sight-seen bid, he is under no real obligation to buy a coin, because he is free to reject it on a sight-seen basis. Some dealers are straight/legitimate in honoring their sight-seen bids, for coins they really do want or need. Others, however, post bids which they often use as a means to have coins offered to them and then make counter-offers or reject coins which are not of premium quality, shot up-grades, etc. Still others use sight-seen bids to try to manipulate the market for particular coins.
The reason why I asked this question is because the answer doesn't seem to be that obvious. In all the dealer-to-dealer trading I've seen or been involved with, the trades were executed at usually anywhere between 0-20% BELOW Bid. So, I was curious as to when the Ask price ever got into the picture. The previous response also implied this same question. The conundrum comes into play when the reader asks that simple question and tries to come up with a simple answer of, hey the dealer wants to buy at the Bid and sell to another dealer at the Ask. Okay, what about the second dealer, they're most certainly looking to pay Bid also? I think Mark has revealed much of what happens behind the scenes with how the CDN comes up with these figures which is exactly what I was looking for in an answer.
I noticed in small-sized shows, dealers typically anticipate buyers to be either other dealers or those collectors with smaller budget and/or carrying a copy of the CDN with them and expecting to pay around those prices. Medium to large sized shows are a different story. With those shows, it's been my experience, that unless you're recognized as a dealer you might have a tough time getting away from paying retail prices (way above Ask!).
The latter's prices are supposedly obtained from a variety of sources and are the result of various bids and actual transactions that occur via auctions, dealer to dealer sales, etc.
<< <i>As I understand it bid is what a dealer will/should pay you for the coin sight seen and ask is what he will sell the same coin to another dealer for. >>
"Bids" are either sight-unseen or sight-seen. There are many of each posted and they should not be lumped together. The differences are often significant, in terms of price and the number of transactions which occur.
"Ask" is merely what someone is asking/trying to get for a coin - sometimes it is quite reasonable and other times it is quite absurd.
The coin market differs from the stock market because each coin is unique while each share of stock is exactly the same as every other share of stock. So, as Mark suggests, bid prices are more meaningful in the coin market than ask prices.
The thing is that coins are not commodities. Both sides of a coin are graded on several criteria (strike, luster, wear, eye appeal) and are boiled down to one number: the grade. Since there are so many MS 65 common date Morgans or MS 65 common date Saints there are legit market makers in those markets in the traditional sense of a market maker. Most other prices in the CDN imply the same amount of liquidity, but are not as liquid. Coins in no way are as liquid as stocks...
Just tell me how much you want for the damn thing.
09/07/2006
K S