Re:Twitter Expected to Begin Layoffs and Stop Headquarters E...
by dragonwriter on Saturday October 10, 2015 @05:29PM
(#10367080)
> It seems to me that stock price is correlated with more money: if I have X stock options worth Y dollars each, I effectively have XY dollars worth of stock
Sure, but the "market" price of stock isn't really the value of every* share, its roughly the marginal price of the last/next share purchased or sold, but the more you want to trade, the farther from the market price the value will be.
And changes to the market clearing price don't tell you about changes to the supply and demand curves, just where they intersect. So, for any but a small quantity of stock, you can't tell what the real change in the realizable value of your holdings is just from the change in the market price, since there's no guarantee that a change of $1 in market price equates to a change of $1/share in the price you'll get if you try to sell a particular quantity of a stock.
We tend to ignore that when placing a valuation on a portfolio because if you don't ignore it, you can't get a valuation. But those valuations are approximations, at best.
Sure, but the "market" price of stock isn't really the value of every* share, its roughly the marginal price of the last/next share purchased or sold, but the more you want to trade, the farther from the market price the value will be.
And changes to the market clearing price don't tell you about changes to the supply and demand curves, just where they intersect. So, for any but a small quantity of stock, you can't tell what the real change in the realizable value of your holdings is just from the change in the market price, since there's no guarantee that a change of $1 in market price equates to a change of $1/share in the price you'll get if you try to sell a particular quantity of a stock.
We tend to ignore that when placing a valuation on a portfolio because if you don't ignore it, you can't get a valuation. But those valuations are approximations, at best.