Execution costs (Equity) question

Can anybody tell me how market impact cost and opportunity cost are inversely related? Thanks

let’s say you want to buy 10,000 stocks. You can either buy everything now -> you might have high slippage (your purchase can push the stock price up, especially in thin, illiquid markets) -> high average price (market impact cost) but you don’t have to worry missing a big market move (opportunity cost). You can try to buy overtime hoping that you will get a better fill or lower average price (low market impact cost) but then you can miss a big move before your order gets filled completely. In other words, if a stock is at $36 now. You can either buy 10,000 for $37-38 dollars and not worry about missing a big move, or you can buy 2,000 for $36 and potentially miss a big move while you are still waiting to for your order for 8,000 stocks to get filled. does that help?

Yes that helps. Thanks Vishal

Market cost / Opportunity cost could potentially wipe out the alpha of many firms. Does anyone know what approach most firms take to prevent losing alpha due to these costs?

optimize execution and diversify their portfolios across markets and strategies