Bid-Ask Spread

The difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask). The spread represents the cost of executing a trade immediately. Tighter spreads (smaller differences) are preferable for traders. For example, if a stock has a bid of $100 and an ask of $100.05, the spread is $0.05 per share. Spreads widen during market stress or for illiquid securities.