Member Info for Peoplepower1

Zeus have a gross margin of 50 for Boohoo for tomorrow.

t4g - you didn't put any figure at all for a net loss.

And your net debt is up to £55m whereas Stockopedia's net debt forecast is £73m, some 35% more than your net debt.

Stockopedia's forecasts for Boohoo are a net loss of £36.5m and net debt of £73m

WolfofWarks - sounds like you're lecturing me now.

I don't agree that complexity can't be made easily understood including investing and corporate finance. If you can't explain things easily, then, for me, you don't understand what you're talking about.

I would imagine you've never subscribed to the Motley Fool. I have. I try everything and then decide what's best for me. I don't dismiss anything.

The FT, Stockopedia and Research Tree are all best for me and so I subscribe to them.

Each to their own.

T4g - if you believe market makers, funds, shorters, are behaving unlawfully then it's up to you to do something about it by reporting it to the FCA through their whistle blowing email address:-

whistle@fca.org.uk

WolfofWarks - if by proper research you mean reading everything I find about the likes of Boohoo, then as far as I'm concerned I do proper research.

I copy and paste from the internet because I think they're worthwhile. Maybe you don't. That's your opinion.

I like things to be easily understood by everybody. I find people who don't understand what they're talking about make it complicated and complex because they don't understand it and so can't explain it easily.

What matters to me when it comes to Boohoo is net debt, gross margin and net profit. Maybe they don't to you. Again it's your choice.

T$G, I see myself as someone who is willing to read everything and anything when it comes to research.

For me, this is what research is all about.

I've learnt the hard way that it's best to never dismiss anything.

No-one is an expert when it comes to investing.

WolfofWarks, the Motley Fool is for new investors, hence, why it's written in a way to help people understand investing easily.

As I've said already, Robert Stephens who writes for Questor in the Telegraph has written for the Motley Fool too.

WolfofWarks, maybe you haven't used a broking service that isn't online. I suggest you try it however not with the likes of IG.

This is what the Motley Fool is about.

It has many different authors who give many different opinions.

It's not about sitting on the fence, it's about giving you lots of different opinions by different people for you to consider and think about.

Yes, WolfofWarks, Institutional Investors, Fund Managers and Retail Investors use brokers to whom you can speak.

Of course they do.

I'm one of them.

There are many broker companies out there and they're thriving.

Robert Stephens writes for many outlets including, for example, the Armchair Trader.

https://www.thearmchairtrader.com/staff-member/robert-stephens/

Large companies have enough liquidity.

Maybe speak to a broker or a bank or a market maker about these impressions you have about liquidity.

Robert Stephens who writes for the Telegraph has also written for the Motley Fool. Russ Mould is quoted in many articles written by the many different authors on Motley Fool.

What's your opinion based on? Have you researched Motley Fool in any way?

Have you read the article in full?

WolfofWarks, after reading everything in full about market makers by Motley Fool, if you think any of the information is wrong, then please state what is wrong and how it is wrong.

To dismiss anything outright without reading it in full, considering ii and thinking about it seems daft to me.

Maybe try reading it in full wolfofwarks before judging it.

Also read about Motley Fool. They are not the fools you may think they are,

Never dismiss anything before reading it in full.

How does market making help investors?

Market makers are an essential cog in the wheel of maintaining high levels of market liquidity.

Without them, global stock markets wouldn’t experience the colossal trading volumes that they currently do.

The presence of a market maker means that there is always someone there to buy and sell certain assets.

They keep markets moving even when there isn’t a buyer and a seller lined up immediately.

Without them, a transaction could take a long time to complete.

A delay could occur if, for example, a buyer and a seller could not agree on a price or the number of shares to be transacted.

Basically, market makers keep the market moving as we know it.

An example of market making profits

Let’s say that Lloyds Banking Group shares are trading at 45p per share.

A market maker might offer a bid price (the price at which they’re prepared to buy) of 44p and an ask price (the price at which they’re willing to sell) of 46p.

That bid-ask spread doesn’t look particularly large, right?

But once you consider that Lloyds shares trade at colossal volumes, then the lucrative business of market making becomes apparent.

Let’s say that 158m of the bank’s shares were bought and sold.

That 2p difference between Lloyds’ bid and ask prices, then, could see market makers generate a profit of £3,160,000 if they processed every order.

That’s assuming that they dealt with every trade in Lloyds shares, of course.

And remember that Lloyds is just one of thousands of shares that trade on the London Stock Exchange every day.

How do market makers make money?

Market makers generate profit through what is known as the ‘bid-ask spread.’

As the name suggests, this is the difference between the price the buyer of an asset will offer (the bid price) and the price the seller will accept (the ask price).

The market maker pockets the difference between these two prices when they complete a transaction.

Fortunately for investors, there is a high degree of competition between market makers.

This ensures that the bid-ask spread does not become too pronounced, which is to the obvious benefit of buyers and sellers.

On paper, the difference between bid prices and asking prices might look that small.

However, market makers are still able to make large profits from their activities due to the colossal number of trades that they execute.

An example of setting prices

So how does this work in practice?

Let’s say that, in a market where supply and demand is evenly balanced, a marker maker prices a UK stock at 199p-200p.

This means that they are prepared to buy the share at 199p and to sell it at 200p.

Now let’s say that some negative news comes in about the company.

For example, earnings could come in lower than forecast, a common reason for a sharp increase in the number of sellers.

Suddenly that UK stock may not look as attractive to buyers with a bid price of 199p.

This means that the number of buy orders might dry up.

Meanwhile, to sellers, an ask price of 200p might appear extremely favourable in light of that bad news.

So brokers could receive an influx of sell orders.

At 199p-200p, the shares are no longer in a state of supply and demand balance.

To restore market equilibrium, a market maker will have to adjust the bid-ask spread to eliminate the gulf between the level of buyers and sellers.

A market maker might have to amend the spread multiple times before supply and demand reach equilibrium again.

For example, they might begin by pricing a share at 198p-199p.

And they might find that the number of buy orders doesn’t match the number of sell orders until the price gets down to, say, 194p-195p.

At this point, they will settle on this new price.

But remember that markets don’t sit still for long.

A vast number of economic, industry, and company-specific factors are always competing at any one time to pull a UK stock’s bid-ask spread one way or another.

The art of market making involves responding to this in a timely manner and displaying up-to-date prices.