In stock-market trading, the bid–ask spread is the difference between the highest buyer offer and the lowest seller request.
The bid is the price a buyer is currently willing to pay. The ask, also called the offer, is the price at which a seller is willing to sell. If a stock shows a bid of $49.98 and an ask of $50.00, its spread is two cents.
Spreads are usually smaller for heavily traded securities because many buyers and sellers compete closely. Less liquid shares, thinly traded bonds, and some foreign-market instruments can have wider spreads. The spread is one of the main ways market makers and other liquidity providers are compensated for facilitating trades.
A spread is not the same as a commission charged by a broker. An investor buying immediately generally pays the ask, while an investor selling immediately generally receives the bid; the difference affects the transaction’s effective cost.