When trading stocks, bonds, currencies or other securities, the prices that the buyer and seller deal with are slightly different. A bid price — usually referred to simply as the bid — is the highest price that a buyer (i.e., bidder) is willing to pay for the security. Ask price — also called offer price, asking price, or simply offer or ask — is the lowest price a seller will accept for the security.

These prices are rarely the same: the ask price is usually higher than the bid price. If you are buying a stock, you pay the ask price. If you sell a stock, you receive the bid price. The difference between the two prices is called the spread.

## Comparison chart

Ask Price Bid Price Ask price, also called offer price, offer, asking price, or simply ask, is the price a seller states she or he will accept for a good. A bid price is the highest price that a buyer is willing to pay for a good. It is usually referred to simply as the "bid."

The “bid-ask spread” is the difference between the bid and ask prices for a security. The percent spread can be calculated as follows:

$Spread\ %=\frac{{Ask\ price}-{Bid\ price}}{Ask\ price}\times100%$

The spread is retained as profit by the broker who handles the transaction and pays for related fees.

Bid-ask spread is affected by a stock’s liquidity i.e., the number of stocks that are traded on a daily basis. Those with larger trading volumes tend to have many buyers and sellers in the marketplace, and therefore will have smaller bid-ask spreads than those that are traded less often.

The size of the bid-offer spread is a measure of the liquidity of the market for that security, and also indicative of transaction costs. If the spread is zero then it is said to be a frictionless asset.

Transaction costs consist of two main elements:

1. Brokerage fees

Under competitive conditions, brokerage fees tend to be small and don't vary. In such cases, the bid-offer spread measures the cost of making transactions without delay. Liquidity cost is the difference in price paid by an urgent buyer and received by an urgent seller.

## Examples

One example of the difference between bid and ask price is with currency exchange. For example, on September 17, 2013 the EUR/USD bid and offer prices were as follows:

• Bid price: 1.3350 USD per EUR
• Ask price: 1.3354 USD per EUR

So someone looking to buy euros would have to pay $1.3354 per euro while someone looking to sell euros would only receive$1.3350. The spread is \$0.0004 and the spread percentage is roughly 0.03%.

Some more examples of ask and bid prices as of September 2013 are included in the table below: