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/biz/ - Business & Finance

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685263 No.685263 [Reply] [Original]

I'm in my second year of my Finance degree and the other day this guy is tried to tell me that stocks are not liquid. Is there something to be said about this or do i just feel bad for him?

pic related

>> No.685267

If your pic is what he said, then he's correct. Not all stocks are liquid and just because you can easily sell them doesn't mean they are liquid.
http://www.investopedia.com/terms/l/liquidasset.asp

>> No.685269

He's trying to set up for a "soup stock" punch line, watch out for that guy.

>> No.685290

>>685263
If you hold 1,000,000 million shares of a penny stock, and the stock has an average volume of 200,000 a day.. that is not very liquid.

If you own 1,000 shares of google, that is perfectly liquid, so long as you are willing to accept losses.

if you aren't willing to accept losses, then the liquidity of your stock is based on the current price, not just volume.

>> No.685297

okay so he basically contradicted himself. not all stocks are liquid...

however, if it's easy to sell, it is a liquid asset. not all stocks are easy to sell

>> No.685302

>>685297
Something can be easy to sell and not be liquid (e.g. you might be able to sell quickly, but only at a distressed price)

>> No.685307

>>685302
I guess that goes into my definition of "easy"

>> No.685336

Liquidity isn't a black/white issue, you morons. There's no such thing as an asset being absolutely liquid or illiquid, only its relative liquidity to other assets. "Are stocks liquid?" makes no sense.

>> No.685436

>>685307
I will buy your entire portfolio for $1. Easy sale, right?

>> No.685446

>>685336
You're somewhere on the autism spectrum, aren't you?

>> No.685460
File: 29 KB, 500x500, 1374544036361.jpg [View same] [iqdb] [saucenao] [google]
685460

>NEETs with 4 figure robinhood accounts worrying about liquidity

>> No.685465

>>685446

The autism spectrum is a continuum. Everyone falls on the autism spectrum somewhere.

>> No.685486
File: 183 KB, 447x483, 1424637934685.png [View same] [iqdb] [saucenao] [google]
685486

>>685460
>NEETs with 3 figure forex accounts not even knowing what liquidity is

>> No.685495

>>685263
I hold a few million shares of a almost literally worthless sub penny stock. There is no bid. Read again, the bid is 0. It is a stock. You tell me if it's liquid. Now answer your own question.
> Is there something to be said about this or do i just feel bad for him?
Feel bad for yourself Opie.

>>685460
This
>>685486
That.

>> No.685687

>>685495
What happens when a stock goes to nothing? Do you just wait for liquidation or hope it gains value or what?

>> No.685689

>>685687
You write it off as worthless.

>> No.685710

are they as liquid as cash?

no

are they as liquid as your pokemon collection ?

Yes

>> No.685718

Liquidity is defined as the ability to convert an asset into cash at the current market price.

Whether a stock is liquid for you depends entirely on the demand.

Compared to assets like futures and forex stocks are fairly illiquid.

/thread

>> No.685726

>>685263
It depends on on how much you want to buy and sell and how much daily volume your stock trades.

Generally, a stock with less than 100,000 shares traded is illiquid. 100,000 to 1million is considered ok liquidity but still not ideal. You really need the stock to be trading millions of shares a day for it to be liquid not thousands.

>> No.685733

>>685446
>being this retarded

>> No.685737

>>685733
Are you 12?

>> No.685741

>>685263

He didn't tell you "stocks aren't liquid". He told you "not call stocks are liquid". And he's right.

Any asset, whether a stock, bond, currency, commodity, real estate, or collectible, is only worth what someone will pay for it.

A stock like AT&T, Google, or Apple is, relative to most other assets, very liquid. Meaning, you almost assuredly can sell it immediately within a few cents per share of the last quoted price.

A thinly traded penny stock, or stock in a bankrupt company, may not be able to be sold at a nonzero price if you hold more shares than there are currently buyers for.

Liquidity crises can happen with other assets as well, as recently as the US real estate bust of 2009 and as far back as the Dutch tulip mania of the 1640s.

>> No.685746

>>685726

Lots of stocks worth $0.0005 trade tens of millions of shares per day.

They are very illiquid.

>> No.686041

>>685746

pretty much you should be looking at a ratio of share price/free-float

>> No.686046

>>685741
>Any asset, whether a stock, bond, currency, commodity, real estate, or collectible, is only worth what someone will pay for it.
Close, but not quite. Determining market value requires a willing buyer AND a willing seller. The highest buyer's price is irrelevant if no one will sell at that price.

>Same is true if the asset is non-transferable, by the way.