Bid-Ask Spread
The difference between the highest price a buyer will pay and the lowest price a seller will accept for a security.
What is Bid-Ask Spread?
The bid-ask spread is the difference between the bid price (the highest price a buyer is willing to pay) and the ask price (the lowest price a seller will accept) for a security. It represents a transaction cost paid by traders and the primary revenue source for market makers. Tight spreads (a few cents or fractions of a cent) indicate high liquidity and active markets, while wide spreads signal illiquidity or uncertainty. Spreads are influenced by trading volume, price volatility, number of market participants, and the security's price level. For highly liquid large-cap stocks like Apple or Amazon, spreads are typically a fraction of a cent. For small-cap or thinly traded securities, spreads can represent a significant percentage of the price.
Example
If Apple stock is quoted with a bid of $184.98 and an ask of $185.00, the bid-ask spread is $0.02, or about 0.01% of the stock price. An investor who buys at $185.00 and immediately sells at $184.98 loses $0.02 per share to the spread — an implicit cost of trading.
Source: Investopedia — Bid-Ask Spread