South Florida Arbitration & Litigation Lawyer Blog
Bid and Asked and Bid-Asked Spread:
The purpose of this post is to provide the reader with a general description of the terms “bid and asked” and “bid and asked spread.” This post is being provided for educational purposes only. It is not designed to be complete in all material respects. Thus, the information provided herein should not be relied upon as legal or investment advice. If you have any questions concerning the contents hereof, you should contact a qualified professional.
The asked price is the price at which a security or commodity is offered for sale on an exchange or in the over-the-counter market. Generally, it is the lowest round lot price at which a dealer will sell. As it relates to mutual funds, it is the per-share price at which a mutual fund shares are offered to the public, usually the net asset value per share plus a sales charge, if any.
The bid price is the price at which a prospective buyer is ready to pay for a security. This term is used by traders who make a market (maintain firm bid and offer prices) in a particular security by standing ready to buy or sell rounds lots at publicly quoted prices.
The bid-asked spread is simply the difference between the bid and asked price. Although the bid and asked dynamic is common to all securities trading, it usually refers to unlisted securities traded in the over-the-counter market.