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I am planning to purchase shares of a particular company that produces electricity using renewable wind power. The share price after market closure yesterday was 13.60. The price has been remarkably stable for the the week before the market closed for the weekend.

I think the company is undervalued and I'm willing to pay 20.00 per one share of the company. This willingness to pay 20.00 per share is partially due to my opinion of undervaluation, but also because my opinion is that as an investor, I should help shape the clean carbon dioxide emission free future of tomorrow. I was planning to purchase so many shares of this company that all the electricity I directly or indirectly need can be said to come from wind power (I also own significant amount of shares in hydropower to balance the production of wind power, and a significant amount of shares in wind turbine manufacturing to help replace the old turbines after 25 years of use). I think purchasing so-called "CO2 free electricity" at exuberant prices from power companies is a scam, and I should instead directly purchase shares of those companies that produce CO2 free electricity.

I would like to maximize the probability of getting the shares for under 20.00 per share, but of course I don't want to risk paying a higher price than what is fair for the current market. My worst fear is that if I send a purchase order now and make it valid for the entire next day the market will be open, the price could be very high when the market opens and settle to a lower value shortly after opening. I could of course specify 14.60 per share as my acceptable price limit, but then I risk the price rising above 14.60 per share immediately at opening, meaning I don't necessarily get the shares at all.

Is there in general any benefit for waiting the market to open and specifying a percent or two larger price than the current price as the limit, or is it a reasonable idea to just send the order now, and specify as the limit the highest value I'm willing to pay per share, which happens to be 47% higher than the last closing price?

Usually, I have waited for the market to open and specified 1-2% higher price as the limit, but this time I could do things differently, if there's not any benefit in waiting.

  • Without knowing the market you trade, or the liquidity of the stock in question, a full service broker might be able to do a VWAP trade for you by trickling in your order to meet your VWAP. A skilled human broker does this all the time for entering/exiting large positions. – Norgate Data May 30 '18 at 14:13
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Your post lends me to believe this might be a thinly traded stock where the bid/ask spreads are >1%?

If the stock is that thinly traded, I typically wait until one minute before the close, when bid/ask spreads are likely to be small, before entering a limit order at the ask.

For normal stocks, I wait until a few minutes after the open for volume & volatility to settle down. If the price moves against me, so be it... I'll wait until the afternoon or tomorrow. When the price is favorable, I then reach across the spread and enter a limit order at the ask. I try to be very careful not to enter a limit order at the bid, in which case it might sit there unfilled, revealing your intentions.

In fact, I once tested this theory when I wanted to sell shares. I entered a limit order to buy below the bid. The price immediately shot up. I then sold my shares at the more favorable price, and cancelled the buy order. Its probably illegal to do this regularly.

Only twice have I ever bought outside normal hours, and those were special situations where I thought the market was under-reacting to earnings reports that would force institutions to dump their shares at market open.

  • Indeed. Trading volume is less than 40 000 USD per day typically and I needed about 4% of the daily trading volume! I ended up waiting for the market to open, which was probably a good idea. – juhist May 29 '18 at 19:03
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If you're willing to pay under $20, I do not see any reason why you cannot just buy the shares at the open. Another thing that you can do as you were suggesting is place stock purchase price limit before the market opens. Wish I have a better answer but anyway keep us posted.

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    Purchasing shares will not facilitate shaping the clean carbon dioxide emission free future of tomorrow nor will it provide you with one iota of electricity. Those companies do not benefit because you purchased someone else's shares and you will only benefit if the company succeeds and share price appreciates. . – Bob Baerker May 19 '18 at 20:29
  • As for purchasing shares at 20.00 per share when it's trading at 13.60, that makes no sense at all. The benefit of waiting for Monday is that you might avoid overpaying by 6.40 per share. If some wonderful news has been released and share price is going to pop then, then that's already baked into the cake. Wait and see what's available in the pre-market. If you can't wait to buy at 20.00, please post the symbol so that I can front run your order ;->) – Bob Baerker May 19 '18 at 20:31
  • @BobBaerker I disagree. If electricity price increases, the power-generating companies directly benefit, and by owning those companies, I benefit. Also, if I purchase the shares, I drive the stock price up, meaning the increased wind power stock prices cause more investment in wind power. Additionally, if everyone buys and holds enough clean energy stocks, there will be no need for fossil fuel generated electricity (except perhaps for peaker power plants). – juhist May 20 '18 at 11:38
  • Your share purchase does not drive stock price up. It contributes to buying pressure. If selling exceeds buying volume, price drops (see 2008 when DJ Ute Avg lost 30+% and nearly 50% total by March). Increased share price does not cause more investment in wind power. Power companies only benefit from your investment in shares if you are buying the IPO (or a secondary), or if your DRIP shares come from purchase of the company's treasury stock. When you purchase shares in the open market, you are transacting with another investor and those dollars are exchanged between the counterparties. – Bob Baerker May 20 '18 at 13:32
  • There will be no need for fossil fuel generated electricity when the day comes that renewable wind power electricity is cheaper than the former and can be produced in sufficient quantity. It will not come from buying shares of a of wind power electricity generator. – Bob Baerker May 20 '18 at 13:33
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It might be worth it to put in a lower opening bid instead of just paying the ask straight out of the gates.

Unless your certain the value of the stock is going to rocket after opening bell, then your just paying for the comfort of having bought the stocks instead of buying them for a good price.

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