The bid-ask spread is the difference between the highest price buyers will pay (bid) and the lowest price sellers will accept (ask). Spreads represent transaction costs and liquidity. Highly liquid stocks (Apple, SPY) have minimal spreads — pennies on $100+ shares. Illiquid stocks, options, and bonds can have spreads of 1-10%. Always check spread before trading — wider spreads mean immediate paper loss after entering. Market makers profit from spreads, providing liquidity. Limit orders let you set your own price within the spread; market orders execute immediately at the best available price (typically the ask if buying, bid if selling).
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Bid-Ask Spread
August 22, 2026 · Aditya Gupta
Investing
Related terms
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A 401(k) is an employer-sponsored retirement plan where employees contribute pre-tax salary that grows tax-deferred until withdrawal. The…
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