Investor Glossary-spreadInvestor Glossary-spreadInvestor Glossary-spreadInvestor Glossary-spreadInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Spread

The HTML to link to this page
 

Spread can mean several different things to investors, depending on the nature of the investment. In the case of stocks or other assets, spread is the difference between the bid price and the ask price. The size of the spread is affected by the total number of shares trading outstanding, demand for the asset, and total trading volume.

In the case of options, spread refers to the act of purchasing a long call option and a short call option, or a long put option and a short put option; each option is then half of the spread. An option spread usually costs less and with lower risk, but has less profit potential than taking a long position outright.

In the case of commodity futures, spread can be the price difference between delivery months in a given market, or the price difference between different contracts or related contracts in a given market. Spread can refer to two strategies in the case of foreign exchange. In the first foreign exchange spread strategy, investors take a long position in one currency and a short position in another. For example, long the U.S. dollar and short the yen. In the second spread strategy, investors take a long and short position in the same currency, but in different months. For example, long the yen in March, short in April.

For fixed income securities, spread can mean the difference in yield between securities that have the same quality rating but different maturity dates, or the difference in yield between securities with the same maturity date but different quality ratings.

Finally, in underwriting, spread is the difference between what an underwriter charges the public for a new security and what the underwriter pays the issuer of that new security; if a security sells to the
for $50 a share, the underwriter may pay the issuer $49 and keep the $1 per share spread.



Rate this spread definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: labor relations, in escrow, command economy, class C shares, ex-dividend date, limit order, balance sheet, LIBOR, implied volatility, required rate of return, stock market close, APR, margin rate, Zero Cost Collar, phantom income, 1035 exchange, retained earnings, inflation, diluted share, VIX, real GDP, annual return, current ratio, dividends payable, risk management, quality assurance, FTSE, EBITDA, irrevocable trust, deferred revenue, stock split, deferred tax, FICO score, reverse mortgage, option premium, wholly-owned subsidiary, average price per share, debt service coverage, 1031 exchange, cancelled check, minority interest, liquidity ratio, 401a, 144a, covered put, Key Rate Duration, ex-dividend, open position, per diem


Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
Investor Glossary Index >>> # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
©2004-2014 Investor Glossary - All rights reserved - Terms of Use