Bid-Ask Spread

Market Mechanics

The bid-ask spread is the gap between the ask and the bid.

If you buy and immediately sell, you lose that gap, so the spread is a hidden cost of trading. It is often just a cent or two in heavily traded large caps and widens in thinly traded stocks, in pre-market trading and after hours.

Example

$49.90

Bid

$50.10

Ask

20 Cents

Spread

With a bid of $49.90 and an ask of $50.10, the spread is 20 cents. Buying 100 shares and selling them straight back costs about $20 even if the price never moves.

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