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What is a bid-offer spread?

The term bid and offer (also known as bid and ask) refers to a two-way price quotation that indicates the potential price at which a share can be sold and bought at a given point in time. The bid price represents the maximum price that a buyer is willing to pay for a share while the offer price (ask) represents the minimum price that a seller is willing to accept for that share. The offer price is always higher than the bid price. You'll pay the offer price if you're buying the stock, and you'll receive the bid price if you are selling the stock.

Bid offer spread = Offer price minus (-) Bid price