Can missed trade opportunity cost be negative?

CFA Level III Portfolio Management
#1

I understand what missed trade opportunity cost is but for a hypothetical question, can this value be negative or is the minimum 0?

Since its a cost due to the failure of trading in a timely manner I’m curious as to it’s values. If we have an original benchmark of $10.00 for the trade and we wish to order 1000 but only 700 are filled, and the cancellation price is say for example 9.95.

Would the missed trade opportunity cost be 0 or 300/1000 * [(9.95 - 10)/10] = Negative 0.0015%?

Thanks,

#2

Depends if investor is buyer of seller. Opportunity cost for buyer is bought at higher cost and opportunity cost for the seller is sold at lower price.

So, in your example if investor is a seller and wanted to sell 1000 stocks at for $10 but sold only 700 for $10 and CP is $9,95, then opportunity cost of missed trade is again (10,00-9,95)/(10) * 300/1000.

If it was buyer then again he bought at higher price then cancellation price thus realized also an opportunity cost, assuming for some reason he canceled the order for rest of 300 stocks at lower price. Formula is same.

#3

In my example, I’m running with the investor is a Buyer.

300 shares of the 1000 shares are unfilled. The stock price has fallen from $10.00 to $9.95 over time. Because we did not fill these 300 shares and the stock price fell, does this mean a negative missed opportunity cost (Investor benefits).

Is this considered a negative missed opportunity cost or is missed opportunity cost limited to a minimum of 0?

Essentially I’m asking, is there a such thing as NEGATIVE missed opoortunity cost.

Thanks

#4

I’d rather say that’s opportunity cost not the benefit. If he bought at higher price and then price had fallen and he canceled an order for some reason at lower cost. This is opportunity cost and negative missed opportunity cost, IMO, does not exist.

Maybe, situation as described is normal upon recently published negative information about a company whose stocks investors bought and price will even decline further next day but investor didn’t know that when order was placed.

#5

I’m trying to reconcile how you could have a buy order for $10 and not execute when then price is at $10 or below.