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What is meant by “bid and ask spread”?

The “bid” price of a stock is the price at which a buyer will buy it, and the “ask” is the price at which someone will offer it for sale in the open market. The spread is the difference between the two.

Here’s an example. You own 100 shares of Gigantic Corporation, and you want to sell them. The bid price – the price at which you can sell this stock - is $10 per share, and the ask price – the price at which you could buy new shares - is $10.50. The spread is fifty cents. Most of the spread is profit for the dealers, who act as agents in the transaction, but also provide the service of keeping the market active for the stock, and keeping the markets liquid.