The Basics of the Bid-Ask Spread - Investopedia.
Bid-Ask Spread On an exchange, the difference between the highest price a buyer of a security or other asset is willing to pay and the lowest price a seller is willing to offer. Generally speaking, the more liquid an asset is, the lower the bid-ask spread is.For obvious reasons, the bid is less than the ask. The difference between the bid and the ask is called the spread. A trader crosses the spread when he offers to buy at the ask, i.e., he offers to pay the sellers' price, which is above what other buyers are willing to pay. The trick is that the trader does this on only one exchange, say Chicago.The forex spread represents two prices: the buying (bid) price for a given currency pair, and the selling (ask) price. Traders pay a certain price to buy the currency and have to sell it for less if they want to sell back it right away. For a simple analogy, consider that when you purchase a brand-new car, you pay the market price for it. The.
The bid price is one of the two prices quoted when trading financial assets, the other being the offer price. The difference between the bid price and the offer price is known as the spread, which is the cost that a trader will incur in order to open a position.Experts define a market maker or liquidity provider as a company or an individual that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the bid-offer spread, or turn.
The government securities market spans a wide range of securities, from the extremely liquid, so-called on-the-run Treasury securities, for which bid-asked spreads are razor-thin, to the more exotic and sometimes tailor-made hybrids and derivatives, for which a fair markup could be sizable.
