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Got an option trading up at $0.40, spread is $0.34B x $0.45A, so I went to set a stop limit on the order at $0.35, but the broker popped up a message that said:
"Your stop price is at or above the current ask price $0.34 and will likely be filled immediately"
Well thats not true, the ask is $0.45, so why am I getting this message? Does the stop limit operate off the bid and they erroneously have "ask" in that message?
A stop (limit) sell order means "execute this order if the price goes below X". For a sell, that price is the bid. So your stop at 0.35 would be executed because the current bid (0.34) is below your stop loss price. That would then create a limit sell which means sell at any price higher than Y. So your stop order would create a limit sell at 0.35 which would likely be filled since it's well below the current ask.
All of that makes sense if their message just has a typo and said "ask" instead of "bid".
The bid is the lower price and the ask is the higher price so someone has made a typo.
A sell stop-limit order combines a stop order and a limit order. If the stop price is reached, a limit order is triggered to execute at a specified price or better.
Your question only contains one price so I'm wondering if you meant a limit order to sell rather than a sell stop-limit order? If so, a limit order to sell at 35 cents when the quote is $0.34 x $0.45 would be likely to execute because splitting the B/A is quite common with options.
