Question

A trading screen for ABC stock shows the following:

Limit Buy Orders (Bid price and number of shares at that Bid level):

$49.75 for 500

$49.50 for 800

$49.25 for 500

$49.00 for 200

$48.50 for 600

Limit Sell Orders (Ask price and number of shares at that Ask level):

$50.25 for 400

$50.50 for 400

$50.75 for 300

$51.25 for 100

A trader entering a market order to sell 800 shares will get what execution price (before commission)?

Question 30 options:

	$49.656
	$50.375
	$49.500
	$49.825

Answer 1

To sell any goods on stock exchange, one can choose either limit price or market price.

Here, the trader is entering the market to sell the shares at market price.

At market price, the seller will get the first trade price available to buy the goods.

If the quantity in the first order is less, he will get the next order for the remaining shares and will continue till all his shares are sold.

So, here the trader wants to sell 800 shares.

So, his first 500 shares will go at 49.75 per share.

Remaining 300 shares will go at 49.50 per share.

So, per share he will get,

(500*49.75)+(300*49.50)/800

= (24875 + 14850)/800

= 49.656 per share