Bid And Asked

Bid And Asked

A two-way price quotation that indicates the best price at which a security can be sold and bought at a given point in time.The bid price represents the maximum price that a buyer or buyers are willing to pay for a security. The ask price represents the minimum price that a seller or sellers are willing to receive for the security. A trade or transaction occurs when the buyer and seller agree on a price for the security.

The difference between the bid and asked prices, or the spread, is a key indicator of the liquidity of the asset - generally speaking, the smaller the spread, the better the liquidity.

Also known as bid and ask, bid-ask or bid-offer.

The average investor has to contend with the bid and asked spread as an implied cost of trading. For example, if the current price quotation for security A is $10.50 / $10.55, investor X who is looking to buy A at the current market price would pay $10.55, while investor Y who wishes to sell A at the current market price would receive $10.50.

The bid-ask spread works to the advantage of the market maker. Continuing with the above example, a market maker who is quoting a price of $10.50 / $10.55 for security A is indicating a willingness to buy A at $10.50 (the bid price) and sell it at $10.55 (the asked price). The spread represents the market maker's profit.

Bid-ask spreads can vary widely depending on the security and the market. The blue-chips that constitute the Dow Jones Industrial Average may have a bid-ask spread of a few cents, while a small-cap stock may have a bid-ask spread of 50 cents or more. On a percentage basis, the difference between the bid and asked prices of the former may be much smaller than that of the latter.

The bid-ask spread can widen dramatically during periods of illiquidity or market turmoil, since traders will not be willing to pay a price beyond a certain threshold while sellers may not be willing to accept prices below a certain level.


Investment dictionary. . 2012.

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Look at other dictionaries:

  • bid and asked — ˌbid and ˈasked adjective FINANCE relating to the highest price a buyer is willing to pay and the lowest price a seller is willing to accept: • The OTC Bulletin Board will provide bid and asked quotes on the smaller stocks. * * * bid and asked UK …   Financial and business terms

  • bid-and-asked — | ̷ ̷ ̷ ̷| ̷ ̷ adjective 1. of market quotations : showing both the least price acceptable to a seller and the highest acceptable to a buyer 2. of a market or exchange : functioning on the basis of bid and asked quotations …   Useful english dictionary

  • bid and asked prices — bid and asked prices, (in stock market quotations) the highest price bid and the lowest price asked for securities that are not actively traded …   Useful english dictionary

  • bid-ask prices — «BIHD ASK, AHSK», = bid and asked prices. (Cf. ↑bid and asked prices) …   Useful english dictionary

  • bid — An offer by an intending purchaser to pay a designated price for property which is about to be sold at auction. An offer to perform a contract for work and labor or supplying materials or goods at a specified price. Public contracts are… …   Black's law dictionary

  • bid — An offer by an intending purchaser to pay a designated price for property which is about to be sold at auction. An offer to perform a contract for work and labor or supplying materials or goods at a specified price. Public contracts are… …   Black's law dictionary

  • Bid-asked spread — The difference between the bid and asked prices. The New York Times Financial Glossary …   Financial and business terms

  • bid-asked spread — The difference between the bid and the asked prices ( bid price; asked price). Bloomberg Financial Dictionary …   Financial and business terms

  • bid price — bid or bid price The trading price acceptable to a prospective buyer of securities. American Banker Glossary This is the quoted bid, or the highest price an investor is willing to pay to buy a security. Practically speaking, this is the available …   Financial and business terms

  • Far and wide — Wide Wide (w[imac]d), a. [Compar. {Wider} ( [ e]r); superl. {Widest}.] [OE. wid, wyde, AS. w[=i]d; akin to OFries. & OS. w[=i]d, D. wijd, G. weit, OHG. w[=i]t, Icel. v[=i][eth]r, Sw. & Dan. vid; of uncertain origin.] 1. Having considerable… …   The Collaborative International Dictionary of English

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