For many people, getting a stock quote is as simple as looking that the ticker on the bottom of their television screen on CNBC and seeing what the last price was that certain stock went for. However, there is much more to a stock quote then the last traded price.
When I was a stock broker, this was one of the hardest things for me to explain to someone. I would have a client call me up and say they wanted XYZ at a certain price. When I told them that the offer was not at that price, they often came back with, “What are you talking about?”
When you pull up a stock quote on any financial website such as Yahoo Finance, the first thing you have to do is enter the stock symbol. Once you do you will be presented with a bunch of numbers and names attached to those numbers, but what does it all mean?
Let’s stick with Yahoo Finance for this example and type in “YHOO” which is the stock symbol for Yahoo. The first number you will see will be labeled “Last Trade.” If the number is 15, for example, that means that the last sale of Yahoo was at $15.00. Under the last trade you will see “Change” and this number will either be green for up or red for down. If the number is green and is at $0.02 that means Yahoo is up two cents from the previous day’s closing price.
What is most important on a stock quote is the bid and the ask. The ask will be a higher number than the bid and there is good reason for that. If the bid for Yahoo is at 15.00 and the ask for yahoo is at 15.05 then the difference is known as the stock’s “spread.” So which is the true price of Yahoo? It all depends.
The bidders are the people who want to buy the stock and are bidding a lower price than the offer. Therefore a buyer can either sit on the bid at their desired price and hope that someone will sell to them, or they can buy the stock at the lowest ask price (this is called buying at the market price). The asks are those who wish to sell the stock. They can either sit on the ask and wait for someone to buy at their desired price or they can sell the stock to the highest bidder (this is called selling at the market price). So the price of a stock depends on whether the transaction goes off on the bid side or the ask side. When you hear that Yahoo is at $15.00 that simply means that that was the last price that Yahoo stock sold for.
When you do get ready to buy or sell a stock be sure that you first talk to your financial advisor and always be sure that you check out the stock quote first. If you simply buy or sell at the market price, you may be in for an unwelcomed “sticker shock.”
Source: Investopedia.com, Stock Basics: How to Read a Stock Table/Quote, Investopedia.com