What Does Bid-offer Spread Mean?

1 Answer

  1. According to a definition of Wikipedia, “It is the difference between the prices quoted for an immediate sale and an immediate purchase for stocks, futures contracts, options, or currency pairs.” Simply speaking we can say that the bid-offer spread is the difference between the price at which you can buy a share and the price at which you can sell it. There is a difference between the two prices because this is how the people who ensure there is a market for the shares make money. Large companies usually have less bid-offer spread as they are huge and trade in bigger amounts, while small companies tend to have very big spreads, as they are harder to trade, so an investment in a very small company can easily be worth a dozen of percentage less than the price you paid for it as soon as you have bought it.

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