Lift The Offer

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21 Aug, 2024

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Lift the offer in trading refers to purchasing a financial instrument at a price the seller sets without engaging in further negotiation, demonstrating an immediate acceptance of the seller's ask price. This action facilitates swift transactions in financial markets.

The transaction is executed when the lift the offer command is given. The execution is prompt to avoid the opportunity being taken by other potential buyers that the seller may encounter. An investor who accepts the offer at the current ask price is often described as an aggressive trader or an aggressor in trading terminology.

Lift The Offer Meaning

Lift the offer, often called lift the ask, is accepting a seller's quoted ask price and purchasing an asset.
An investor, often termed an aggressive trader, may decide to lift the offer or instruct their investment manager to do so.
Investors typically receive ask prices and competitive offers from various stock exchanges worldwide. They select the most favorable price available and initiate the transaction immediately without engaging in negotiation or re-quoting, ensuring prompt execution.

Lift The Offer Explained

Lift the offer is one of the many commands an investor gives their investment manager or financial adviser. In any trade or transaction, a buyer and a seller of financial instruments exist. The seller quotes a price at which they wish to sell the asset, known as the ask price. The buyers and sellers usually negotiate and re-quote costs to facilitate the transactions and reach an agreement.

However, the buyer sometimes does not negotiate and accepts the current ask price. This buyer is an aggressor and lifts the offer independently or through their manager. They might lose the offer if they negotiate or wait for a limit order. A limit order is a more favorable price the seller asks for, for the same asset.

Sometimes, the buyer might even cross the market, i.e., the buyer's bid price is greater than the seller's ask price. Anyhow, this leads to the lifting of the order. After the offer is lifted, the transaction is executed, payment is made, ownership is transferred, and the asset becomes the buyer's.

Today, buyers and sellers have various options for getting the best bid and ask prices. The best ask prices are displayed within an exchange, and the buyers can choose the cheapest deal. Or, they can select the deal that brings them other essential features, such as enhanced rights and decreased obligations.

Buyers can explore global exchanges, with some having direct broker access for swift execution. No dealing desks connect currency traders to interbank markets and provide optimal deals from liquidity providers, banks, and investors.

Market makers and dealing desk platforms facilitate trades by taking opposing positions, particularly in derivatives markets where parties speculate on underlying asset or index movements.

Examples

Let us refer to the following examples for more clarity on the concept.

Example #1

Mary is on a quest to acquire shares of Company X. Along her journey, she encounters a series of ask prices from different sellers. Many of these offers are above $60 per share, which Mary considers inflated. However, her determination eventually gives her an attractive ask price of $50 per share.

Recognizing the opportunity, Mary wastes no time. She swiftly instructs her dedicated investment manager to lift the offer. This decisive action triggers the immediate execution of the transaction. By day's end, Mary is the proud owner of the desired shares, showcasing how lifting the offer allows investors to seize advantageous market opportunities efficiently and without delay.

Example #2

Imagine Sarah, an astute investor, is closely monitoring the cryptocurrency market. She has been watching the price of a particular digital coin, CryptoCoinX, and believes it is a good opportunity to invest. After conducting thorough research, Sarah decides to buy CryptoCoinX at the current market rate.

The current market rate for CryptoCoinX is $500 per unit, as displayed on her cryptocurrency exchange platform. Without hesitation, Sarah chooses to lift the offer. She places a market order, accepting the ask price set by the seller, which is $500 per unit. This action initiates an immediate purchase of the cryptocurrency at the prevailing market rate.

In this scenario, Sarah effectively lifts the offer by accepting the seller's ask price without negotiation or delay. This decision allows her to acquire the desired cryptocurrency promptly, illustrating the concept of lifting the offer in cryptocurrency trading.

Lift The Offer vs Hit The Bid

Lifting the offer is often contrasted with hitting the bid. Let us understand the difference between the concepts.

Lifting the offer involves a buyer accepting the ask price set by the seller without negotiation; whereas hitting the bid consists of a seller selling the financial instrument at the highest bid price set by the buyer.
Lifting the offer is typically initiated by a buyer who accepts the seller's ask price. Conversely, hitting the bid is primarily undertaken by a seller who agrees to the buyer's bid price.
Lift the offer occurs at or above the seller's ask price, indicating a willingness to pay the price the seller sets. In contrast, hit the bid takes place at or below the highest bidding price, indicating a desire to sell at the price proposed by the buyer.
Lifting the offer involves no negotiation; the buyer accepts the seller's asking price. On the other hand, hitting the bid involves minimal negotiation, as the seller agrees to the highest bid without extensive haggling.

Here is an example of hitting the bid. Suppose Ryan is a trader who wants to sell an asset. Kate bids $100 to buy the asset, which was, by far, the highest bid Ryan had received. Ryan informs his investment manager to hit the bid and accept the offer. Ryan and Kate agree, and the asset is sold to Kate.

Frequently Asked Questions (FAQs)

1. Am I buying or selling if I lift the bid?

The terminology 'lift the bid' needs to be corrected. A seller hits the bid, and a buyer lifts the offer. However, since lift means taking or approving a request, lifting a bid can be considered accepting a bid. Therefore, the party who hits a bid is a seller. The trader should lift the offer or ask to be a buyer. It is essential to get these terminologies right, as they are commands given to one's investment manager.

2. Is Lift the offer suitable for long-term investors or day traders?

It can be used by long-term investors and day traders, depending on their trading strategies and objectives. Long-term investors may use it when they find an attractive entry point, while day traders may use it for quick, intraday trades.

3. How can I execute a "lift the offer" trade on a trading platform?

One can place a market order for the desired financial instrument to execute a "lift the offer" trade on a trading platform. It's essential to ensure adequate funds or buying power to complete the purchase swiftly and at the current asking price.