2006-11-01 02:17:48 · 7 answers · asked by tagi_65 5 in Business & Finance ➔ Investing
The Bid/Ask Spread
When it comes to actually buying and selling shares of stock, the exchanges act more like flea markets than centers of financial sophistication. That’s why you need to understand the bid and ask prices.
Unlike most things you buy, both the buyer and seller set stock prices. The buyer states what price they will pay for the stock – this is the bid price.
The seller also has a price – the ask price.
It is the role of the stock exchanges and the whole broker/specialist system to facilitate the coordinating of the bid and ask prices. However, this service doesn’t come without a price.
The Bid/Ask Pricing
If you have access to the proper online pricing systems, you can see the bid and ask prices. The Nasdaq structures its pricing around the bid-ask.
You will notice that the bid price and the ask price are never the same.
The ask price is always a little higher than the bid price.
What this means is if you are buying the stock you pay the ask price (the higher price) and if you are selling the stock you receive the bid price (the lower price).
The Bid/Ask Spread
What happens to the difference between the two prices? This difference is the spread and it is kept as profit by the broker/specialist handling the transaction. In truth, the spread goes to pay a number of fees in addition to the broker’s commission. Note: This is not the same commission you pay a retail broker.
Because prices move constantly, especially for actively traded stocks, you can’t know what price you will get if you are a buyer or a seller unless you use specific market orders. See my article on market orders.
Conclusion
There are ways around the bid/ask spread, but most investors are better off sticking with the established system that works well, even if it does take a little ding out of your profit.
2006-11-01 02:20:36 · answer #1 · answered by Husker 3 · 2⤊ 0⤋
The bid price is the price at which the buyer is willing to purchase the stock.
The ask price is the price at which a seller is willing to sell.
2006-11-01 02:23:50 · answer #2 · answered by bookbyte 3 · 1⤊ 0⤋
It means is if you are buying the stock you pay the ask price (the higher price) and if you are selling the stock you receive the bid price (the lower price).
2006-11-01 02:21:57 · answer #3 · answered by Cheryl S 2 · 0⤊ 0⤋
Ash price is what the seller want for his stock. Bid price is what the buy wants to pay for the stock.
2006-11-01 02:22:14 · answer #4 · answered by Anonymous · 0⤊ 0⤋
Haven't thought about it
2016-07-27 23:40:09 · answer #5 · answered by Juliet 3 · 0⤊ 0⤋
Was looking for a good answer on this too
2016-09-20 22:37:46 · answer #6 · answered by Anonymous · 0⤊ 0⤋
It depends..
2016-08-23 09:53:34 · answer #7 · answered by ? 4 · 0⤊ 0⤋