Question

*Please explain

If a market maker posts a quote of 10.00 – 10.10 [25x10], which of the following actions is the market maker willing to take?
A.   Sell 1,000 shares at $10.00 and buy 2,500 shares at $10.10
B.   Buy 2,500 shares at $10.00 and sell 1,000 shares at $10.10
C.   Sell 100 shares at $10.00 and buy 250 shares at $10.10
D.   Buy 250 shares at $10.00 and sell 100 shares at $10.10

Answer 1

The answer is : Buy 2,500 shares at $10.00 and sell 1,000 shares at $10.10

10.00 is the bid rate and 10.10 is the ask rate.The bid is where market maker is willing to buy (So here you can sell your stock to them) and the ask is where market maker is willing to sell the shares (So you can buy from them).

The left side is always the bid and the right side is always the ask.

The number (25x10) are quoted in round lots (100 Shares) . Therefore 25=25 round lots =2,500 and 10=10 round lots=1,000.

From above explanation we can understand that "Buy 2,500 shares at $10.00 and sell 1,000 shares at $10.10'.