Bid-ask spread
Also called: spread
The gap between the best ask and the best bid, a hidden cost paid every time you buy and then sell.
Spread = best ask − best bid, often expressed as a percentage of the price. Buying at the ask and selling straight away at the bid loses the spread even if the price has not moved.
Large, liquid companies usually have spreads of a few paise. Small, thinly traded shares can have spreads of several percent.
Example
A share with a bid of ₹99.80 and an ask of ₹100.00 has a spread of 20 paise, or 0.2%.
Learn more in these lessons
- Bid, ask, spread and liquidityWhat are the bid price, ask price and spread?
- Liquidity and slippage in derivativesWhy can't you always exit an options position at the last traded price?
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