Bid-ask price Question
(12 * 100) * 1.01 = 1212 Assuming the $12 ask can absorb your whole 100 share order.
If you are looking to go long (buy) you would use bid prices as this is what you will be matched against for your order to be executed and a trade to go through. If you are looking to go short (sell) you would use the ask prices as this is what you will be matched against for your order to be executed and a trade go through. In your analysis you could use either this convention or the midpoint of the two prices. As FX is very liquid the bid and ask prices would be quite close to each other, so the easiest way to do your analysis is to use the convention I listed above. Depends on when you are seeing these bids & asks-- off hours, many market makers pull their bid & ask prices entirely.  In a lightly traded stock there may just be no market except during the regular trading day. "Why would there not be a bid and ask?  Dealers make their money in the spread between what they buy it from one entity for and what they sell it to another entity for.  This doesn't mean they have to do it auction-style, but they'll still have a different buy price from a sell price, hence ""bid"" and ""ask""." When you want to short a stock, you are trying to sell shares (that you are borrowing from your broker), therefore you need buyers for the shares you are selling.  The ask prices represent people who are trying to sell shares, and the bid prices represent people who are trying to buy shares. Using your example, you could put in a limit order to short (sell) 1000 shares at $3.01, meaning that your order would become the ask price at $3.01.  There is an ask price ahead of you for 500 shares at $3.00.  So people would have to buy those 500 shares at $3.00 before anyone could buy your 1000 shares at $3.01. But it's possible that your order to sell 1000 shares at $3.01 never gets filled, if the buyers don't buy all the shares ahead of you.  The price could drop to $1.00 without hitting $3.01 and you will have missed out on the trade. If you really wanted to short 1000 shares, you could use a market order.  Let's say there's a bid for 750 shares at $2.50, and another bid for 250 shares at $2.49.  If you entered a market order to sell 1000 shares, your order would get filled at the best bid prices, so first you would sell 750 shares at $2.50 and then you would sell 250 shares at $2.49. I was just using your example to explain things.  In reality there won't be such a wide spread between the bid and ask prices.  A stock might have a bid price of $10.50 and an ask price of $10.51, so there would only be a 1 cent difference between putting in a limit order to sell 1000 shares at $10.51 and just using a market order to sell 1000 shares and getting them filled at $10.50. Also, your example probably wouldn't work in real life, because brokers typically don't allow people to short stocks that are trading under $5 per share. As for your question about how often you are unable to make a short sale, it can sometimes happen with stocks that are heavily shorted and your broker may not be able to find any more shares to borrow. Also remember that you can only short stocks with a margin account, you cannot short stocks with a cash account. When there is a difference between the two ... no trading occurs. Let's look at an example: Investor A, B, C, and D all buy/sell shares of company X. Investor A wants to sell 10 shares at $20 a share (Ask price $20 x10). Investor B wants to buy 15 shares at $10 a share (Bid price $10 x15). Since the bid price and ask price are different, no sale is made. Next Investor C comes along and wants to sell 5 shares at $14 (Ask price $14 x5). Still no sale. Investor D comes along and wants to buy 5 shares for $14 each. So a sale is finally made. At this point, the stock quote moves to $14. The ask price is $20 x10 and the bid price is $10 x15. No further trading will occur until another investor is willing to buy at $20 or sell at $10.  Another discussion of this topic is shown on this post. "In real life, you'd see spreads like AMZN 04/13/2017 910.00 C 4.90 +1.67 Bid: 4.75 Ask: 5.20 (with AMZN @ $897 right now) and the fill you'd get on the buy side would be closer to the ask. i.e. I'd offer $5.00 and hope that it filled.  Filling a $4 bid when ask is $8 isn't likely unless the stock blipped down enough for your price to fill.  Options are a lot like day trading, in most cases. Most members here will agree that day trading isn't investing, it's gambling. Long term, the S&P has been up 10%/yr. But any given day, the noise of the market is a 50/50 zero sum game. Most long term stock 'investors' do well. Those who get in and out, not so much.  There are aspects to options that are appealing. As you've seen, the return can be high, even IRL, but your loss can be 100% as well. Let me share with you a blurred line - I wrote ""Betting on Apple at 9 to 2"" in which I described an option strategy that ran 2 years and would return $10,000 on a $2200 bet. A similar bet that ended a year ago yielded a 100% loss. I don't post there very often, as I keep that trading to a minimum.  There are warnings for those who want to start trading options -" "Price is decided by what shares are offered at what prices and who blinks first.  The buyer and seller are both trying to find the best offer, for their definition of best, within the constraints then have set on their bid or ask. The seller will sell to the highest bid they can get that they consider acceptable. The buyer will buy from the lowest offer they can get that they consider acceptable. The price -- and whether a sale/purchase happens at all -- depends on what other trades are still available and how long you're willing to wait for one you're happy with, and may be different on one share than another ""at the same time"" if the purchase couldn't be completed with the single best offer and had to buy from multiple offers. This may have been easier to understand in the days of open outcry pit trading, when you could see just how chaotic the process is... but it all boils down to a high-speed version of seeking the best deal in an old-fashioned marketplace where no prices are fixed and every sale requires (or at least offers the opportunity for) negotiation. ""Fred sells it five cents cheaper!"" ""Then why aren't you buying from him?"" ""He's out of stock."" ""Well, when I don't have any, my price is ten cents cheaper."" ""Maybe I won't buy today, or I'll buy elsewhere. ""Maybe I won't sell today. Or maybe someone else will pay my price. Sam looks interested..."" ""Ok, ok. I can offer two cents more."" ""Three. Sam looks really interested."" ""Two and a half, and throw in an apple for Susie."" ""Done."" And the next buyer or seller starts the whole process over again. Open outcry really is just a way of trying to shop around very, very, very fast, and electronic reconciliation speeds it up even more, but it's conceptually the same process -- either seller gets what they're asking, or they adjust and/or the buyer adjusts until they meet, or everyone agrees that there's no agreement and goes home." I can often get the option at [a] price [between bid and ask] The keyword you use here is quite relevant: often. More realistically, it's going to be sometimes. And that's just how supply and demand should work.  The ask is where you know you can buy right away. If you don't wanna buy at ask, you can try and put a higer bid but you can only hope someone will take it before the price moves. If prices are moving up fast, you will have missed a chance if you gambled mid-spread. Having said that, the larger the spread is, the more you should work with limits mid-spread. You don't want to just take ask or bid with illiquid options. Make a calculation of the true value of the option (i.e. using the Black Scholes Model), then set your bid around there. Of course, if not only the option but also the underlying is illiquid, this all gets even more difficult.