I'm a newbie and am looking at ALOG. It has a spread of 36.80 and 37.61 (using IB BEST). What causes this kind of large difference? I've seen this a few times and don't know what to make of it. How can you tell if it means more selling or buying pressure? Is there any way to take advantage of this situation or is it best to just wait?
ALOG is a very thin stock... only averaging 15000 shares a day. You could try and make money by stepping inside the bid and ask and playing market maker. But then you are taking the risk of carrying shares you can't get rid of. If there's not a market maker willing to take that risk... I wouldn't suggest that you try.
Fletch is right, thinly traded stocks are landmines and generally should be avoided. But if you are seriously interested in getting into the stock or trading it for whatever reason... Play from the side you want to wind up with. If you are bullish the stock and don't mind owning it at a LOWER price, go long, then immediately get inside the ask with a sell order as Fletch mentioned. Do the opposite from the short side. That way if you wind up stuck with the stock, you don't mind...until that happens, you can play MM and take the spread until they tighten it.
I actually killed myself last week when a stock had a 1.15 spread. I didn't know the spread could get that large so my mind saw a 0.15 spread and I wiped out all my gains for the last two weeks. Learning the hard way...Thx.