Selling shares to yourself

[lazyday]

For tax reasons, I'm planning to "move" shares of Vanguard's VWO Viper from an IRA to a taxable account.
I'm not concerned with the small commissions I'd have to pay, to buy in taxable and sell in IRA, but the spread on this fund is large, and I don't want to pay it.
So, my plan is, to put a limit order in both accounts, one to buy, and the other to sell. I would literally sell to myself, if it works as planned.

I guess that if there's more buying than selling (other than from the institution that provides/destroys the creation units) then I would place my limit orders somewhere between the midpoint of the bid/ask spread, and the ask. I suppose I'd put the sell in first, then immediately put the buy in at the same price and number of shares.

If my first order gets filled before my second order is accepted, it would most likely be the market maker, since trading is relatively light. So, I want to put my first order in, far from NAV in case NAV moves before my second order is accepted. I'm thinking that if there's buying pressure, the spread may not center on NAV, but a little above it.

Example:
ASK 60.40
BID 60.00
Last 60.40
My guess of NAV: 60.10 to 60.20, but a moving target.
Place Sell at 60.35, then buy at 60.35.

Maybe if eveyone (other than market maker/creatn unit institution) is buying, I should instead place buy at 60.10, then sell, in case the market maker for some reason is "nice" and fills the unusual 60.35 sell? This is a Vanguard fund, not sure the market maker is a ruthless profiteer.

Opinions?

* To be more technically correct, true NAV but adjusted for expectations of price changes in closed markets because of today's changes in open markets.

 

[MasterBlaster]

Perhaps the better question would be:

How do I sell shares to myself ?

Can Vanguard arrange this and maybe charge a small commission?
Let Vanguard be the Market Maker for you and price the shares at the last known trade.

Why do you even need to go through the exchange ?

 

[LOL!]

I think this is a fabulous idea because it is kookie.  But what if someone else has a limit order in before you?  Does your broker web site give you Level II quotes so that you can see some of the action?  Have you looked at an intraday volume chart?  I can post one if you like.

I'd put the limit order to buy in first, if possible though.

Another idea might be to buy EEM which should have a lower bid/ask spread due to its higher average volume. FD: I own some EEM.

 

[Nords]

For tax reasons, I'm planning to "move" shares of Vanguard's VWO Viper from an IRA to a taxable account.
I'm not concerned with the small commissions I'd have to pay, to buy in taxable and sell in IRA, but the spread on this fund is large, and I don't want to pay it.

What does Vanguard say (or whoever your brokerage is)? Maybe they'd be willing to move the shares from one account to another and pocket your entire commission to avoid having to share with the trading desk?

I'm guessing that you've already looked at the tax/penalty aspects of moving IRA money to a taxable account.

 

[lazyday]

I don't want to do an actual withdrawal, would be very bad for my taxes.

Shares aren't held at Vanguard. I hadn't thought to ask my deep-discount broker about doing both trades for the commission, didn't think they'd want to bother with something like that, and was worried it might look like an IRA withdrawal to the IRS. Come to think of it, I don't think I trust them to do it. If they screw it up, might be hard/costly to fix.

I don't really want EEM, as it has a higher ER, and I have more faith in Vanguard than Barcleys, and hope for some benefit from multiple share classes.

I don't think I have access to level II quotes. So, maybe I'd be missing something just looking at the bid/ask spread? I thought that would show the narrowest spread of limit orders. I don't know what an intraday volume chart looks like. If it shows limit orders, I'd like to see it.
Why place buy before sell, LOL?

 

[JPatrick]

Unless I'm missing something here, I think level II is for NAS stocks only.  Your ETF's are AMEX. 

 

[LOL!]

Suppose someone has entered a limit order before you ... at your limit price.  Then that order should get the shares you sell ... or part of the shares you sell.  If you enter the order first ... it is sitting there waiting for your sell.

An intraday volume chart will show you when folks trade shares of VWO.

Level II quotes will show you all the buy/sell orders that have stacked up.

 

[lazyday]

Thanks for the chart, looks like it trades more than I thought.

If I see the bid/ask spread is 60/60.40, and put my limit order in at 60.35, how could someone have put in an order at my price? Doesn't the bid/ask reflect limit orders? I sometimes see that the size of the bid or ask is pretty small, often even too small to fill my whole order. (For something like VWO.)

Someone else might enter an order just as I'm about to click "go" but I'd think that risk would be somewhat low, unless trades happen more frequenlty than when I last bought VWO, and the "last" trade didn't update very often. Your chart makes me think that might be. Still, a few seconds during the afternoon, after lunch but not just before closing, seem pretty safe I'd think... It's the market maker I'm more worried about filling my first order before the second order comes.

I might decide to do the buy before the sell, like you say, since there's buying pressure (I think) and it might be easy to sell without paying much of the spread, if the buy order unexpectedly gets filled before I enter the sell order.

 

[haha]

Why not put in the limit buy order in your taxable account, look at it during trading, and "hit the bid" with your sell order? If your bid is the highest one there, a market sell order will fill it

Things could go wrong, but it is unlikely and no big deal anyway.

Ha

 

[LOL!]

Here is this a.m.'s LevII quote for VWO.
It looks to me like you could get a couple hundred shares for 59.58 now, but your next seller is asking 61.52 ... let me buy those 200 shares and see what happens.

Missed 'em, now trading at 59.92 ... 59.97 ... bid/ask now is 2 cents for 200 shares.

 

[lazyday]

Wow, maybe I am missing something when I see bid/ask spreads with my brokers.
Ive never seen a spread that tight on VWO, even for a few hundred shares. (Not that I've looked in the last few months, though.)

I plan to look tomorrow morning, as I'll be home, and post what I see.

 

[LOL!]

It looked to me like the bid/ask spread was quite tight when the 'current' volume was high. I had thought you sold your 13000 shares this morning at 9:40 am.

At the end of the day and during low trading volume times, I've seen the bid/ask spread to be pretty large as all the trading has been done and no one cares to budge.

 

[Texas Proud]

In a market as big as we have, there is NO WAY you can sell to yourself... in the open market.  If you have both accounts with a broker then they might be able to do something using market rates, but doing it in the open market is impossible...

 

[ats5g]

Hey Texas,

Yes, it's called an in house cross. Doesn't have to go to the market, as long as your getting the best price, that is, and the broker isn't violating any execution rules.

- Alec

 

[lazyday]

OK, I checked today and VWO trades very differently from when I last bought it. Used to be a very wide spread, and thin trading, even around lunchtime.
Now, I see 1x10 hundred shares with a few pennies spread, and thousands of shares traded around the ask price, which moves much more frequently than before.

I'll need to rethink my strategy, but it's less important now, since even if I don't sell to self, it seems I'll likely only lose a tiny fraction of a percent on the switch, since the spread has tightened.
Will have to see if I can log into two accounts from two computers at the same time.

 

[lazyday]

In a market as big as we have, there is NO WAY you can sell to yourself... in the open market.

For something like Microsoft, I agree. But, should be quite possible for something with a very wide spread and low volume, like VWO was when I last bought it.
You might even pull it off on something with a medium size spread.

Today, VWO has a very small spread, so odds aren't good, but cost of not trading with self should be relatively low.

 

[Texas Proud]

For something like Microsoft, I agree. But, should be quite possible for something with a very wide spread and low volume, like VWO was when I last bought it.
You might even pull it off on something with a medium size spread.

Today, VWO has a very small spread, so odds aren't good, but cost of not trading with self should be relatively low.

If you read what I had said, I said 'in the open market'... you might be able to buy and sell shares at the same price, but you will not be selling to yourself unless we are talking about a stock that trade very little... and I mean very little trading... I have seen some stock make one trade every 15 or so minutes, but that is rare... when I look at this one, there seems to be trades all the time..

 

[lazyday]

Well, I'm happy to report it worked!

I wasn't sure it would, since the spread was so small when I placed the orders today (just 3 cents).

I placed the buy, and in under a second, got my confirmation number that I had placed an order. Then, I immediately clicked on the other computer to place the trade for the sale. I then checked the quote and order status, and sure enough, I had sold to myself, and the day's volume went up by the number of shares I sold to myself. (Both accounts showed the orders were filled. I used limit orders, both at the same price, which was between the bid and ask.)

Since the spread has been so small, and volume not too low, I wasn't too worried if the buy happened before the sell, since a sell would probably be possible close to the same price.