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In practical terms, the bid is the available price at which an investor can sell shares of stock. The ask is the available price at which an investor can buy shares of stock. The bid and the ask together create the dealer’s quotation. This system of bid and ask pricing is used by the stock markets to match buyers and sellers.
The ask price is almost always a little higher than the bid price. The difference, or spread, between the bid and ask is what the market makers use as their profit margin for handling the transaction. If the bid is $2.20 and the ask is $2.23, the spread between the bid and ask, also called the bid/ask spread, is .03 or 3 cents. |
