Bid/Ask Spread

The bid/ask spread is the difference between the bid price (what buyers will pay) and the ask price (what sellers will accept) for a security. It represents the transaction cost for traders and serves as a key measure of market liquidity. Tighter spreads indicate more liquid markets with lower trading costs, while wider spreads occur in less liquid or volatile markets. Spreads are influenced by factors such as trading volume, volatility, and the number of active market makers.