What is float in stocks?
A float in stocks is the number of shares of a company that is available to the public to buy and sell. Because float stocks involve shares that can be freely traded, they are also known as free float or public float. This is important because the free float or public float shows how market volatility can affect the stocks of a company. A higher stock float means volatility in the stock market may have little effect on the company compared with a low stock float which means any fluctuation in the stock market may have a severe impact on the stocks of a company.
Free float gives you the number of shares available for anyone to purchase or sell in the stock market, this shows it subtracts the number of any restricted shares (or locked-in shares) from the outstanding shares.
Not all outstanding shares are available for trading; some are locked or restricted and such cannot be traded. Examples of restricted shares include restricted share units, restricted share awards, stock options, treasury stocks, shares in the hands of the government, shares owned by promoters, and investors with controlling interest.
Public float can be determined by subtracting the number of restricted shares, treasury stock, from the outstanding shares. Free float assesses how easily the stocks of a company can be bought or sold. When a company has a high stock float, it means you can easily find buyers and sellers when trading the stocks; but if a company has low float stock, it means you will find it hard to get buyers or sellers for trading such stocks.
Online Finance Float Calculator
Free Float Calculation
A simple way of calculating the float of a company is to get the outstanding shares and the restricted shares. The restricted shares include closely-held shares, treasury stocks, and all shares that are held for ownership interest rather than for trading; this is important. You then subtract the number of restricted shares from the outstanding shares to get the float of the company.
You can use the finance float calculator below to get the floating stocks of a company. Click on the “Calculate button” to get the floating shares.
Floating stocks can be expressed as a percentage of the outstanding shares or as a figure. The finance float calculator will give you the percentage float as well as the figure.
What is a good float for a stock?
A float above 10 million shares is good for trading because the volume is large enough to trade without much volatility of the stock market affecting your trading. This is just an estimate but it is a good guide. The higher the number of float shares above 10 million, the better it is to trade the stocks of the company. The lower the floating shares below 10 million, the more difficult it becomes for you to find buyers or sellers and such stocks can easily fall or rise because of the low float.
A good float percentage is above 10%. The higher the float percentage is above 10%, the better for you as a trader.
Why is a stock’s float important?
A float is important to a trader because a high float percentage shows you how easily you can find buyers when you want to sell the stocks or how easily you can find sellers when you want to buy the stocks. It means there is liquidity in trading. Imagine you buying stocks with the intention of selling (income stocks) but you are unable to find buyers when the stock price is up. This means you are stuck with shares that would have been profitable and you just have to wait until you find a buyer while hoping the price doesn’t fall as well.
No trader wants to wait to sell or buy stocks because the price may fall or rise at any time. You want liquidity and a high float stock means there is liquidity in trading stocks whereas a low float means there is illiquidity in trading stocks.
Are floating shares good or bad?
Floating shares are good for the company because it provides an easy way to increase capital without getting into debt. The disadvantage to the company issuing the floating shares is that the stocks are open to the volatility of the stock market.