Bid-ask spread

The gap between the highest bid and the lowest ask

In detail

The bid-ask spread is the difference between the highest price buyers are bidding and the lowest price sellers are asking in the order book. A market buy fills at the ask and a market sell fills at the bid, so buying and immediately selling loses the spread. Heavily traded stocks tend to have narrow spreads; thinly traded ones tend to have wide spreads.

Example

With a bid of $998 and an ask of $1,002, the spread is $4, about 0.4% of the price.

Related terms

Order book Liquidity Market order Slippage

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