Do you mind the spread?
As we all know the bid-ask spread is the way the specialists and money makers make thier money. For example, a heavily traded stock with a volume of 100 mln per day and bid-ask spread of a penny can fetch $1 mln per day — not a bad daily wage as compared with average of $100 per day for ordinary mortals. (QQQQ has such a volume and MSFT, INTC,CSCO or AAPL ocasionally can reach a 100 mln shares per day too)
Stocks that are not that liquid can have much wider bid-ask spread to compensate for the ‘loss’
My question is, given large enough volume to keep the spread equal to 1 penny (assuming you can not place a limit order with accuracy higher than a penny as is in most cases) would you prefer to trade a $20 stock or a $80 one? Don’t you think that trading the first one is much more “expensive”?
All else equal, I’d play the $80 stock.
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