What is Bid-Ask Spread?

Bid-Ask Spread refers to the difference in price at which the seller of a security is ready to sell i.e. the offer or sell price and price at which a buyer is ready to buy the same i.e. the purchase or the buy price. A trade in the stock market materialises when the two prices match i.e. the buyer and seller agree at a particular price being offered.

Both the prices are found by the gap between the forces of demand and supply. The greater the gap, the greater will be the Spread. It is expressed both in absolute and percentage terms. The Spread values are small when the market is very liquid and vice versa.