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The bid-ask spread

The gap between the highest bid and the lowest offer, how market makers and internalized trades relate to that gap, and when spreads tend to widen.

The short answer

The bid is the highest price a buyer (often a market maker) is currently willing to pay for a stock. The ask, also called the offer, is the lowest price a seller is willing to accept. The spread is the difference between those two prices. A buyer who takes the offer, or a seller who hits the bid, crosses that gap; a narrower spread usually means a smaller built-in cost to trade.

Bid, ask and the spread

An SEC Fast Answer on the spread defines the spread as the difference between the bid price and the ask price on over-the-counter market securities. The bid is the highest price a market maker will pay at a given time for a specified number of shares. The ask, also called the offer, is the lowest price at which a market maker will sell the stock. The ask is almost always higher than the bid. The same page notes that market makers make their money on the spread.

The same idea appears when a broker fills an order from its own inventory. The SEC's trade-execution publication calls that internalization, and says the firm may make money on the spread: the difference between the purchase price and the sale price. That publication also describes monthly execution-quality reports in which market centers disclose effective spreads, meaning the spreads actually paid by investors whose orders were routed there.

When the spread tends to widen

The spread is not a fixed fee and is not the same in every stock or at every hour. The SEC's publication on after-hours trading lists larger quote spreads as one of the risks of trading outside regular hours, because there may be less trading activity. Thinly traded stocks can show wider spreads during the regular session too. A wide spread does not, by itself, say whether a stock is a good or poor investment; it is a fact about the quotes at that moment.

The bid is the highest displayed buy price; the ask (offer) is the lowest displayed sell price.
The spread is the difference between them.
Effective-spread figures in market-center reports describe spreads actually paid, not just the quotes on the screen.

Common questions

What is the bid-ask spread?

The difference between the highest price a buyer is willing to pay (the bid) and the lowest price a seller is willing to accept (the ask or offer).

Why is the ask higher than the bid?

The SEC's Fast Answer on the spread says the ask will almost always be higher than the bid. The gap is how a market maker earns a turn for standing ready to buy and sell.

Does the spread apply only to over-the-counter stocks?

The Fast Answer defines the term in the OTC setting. The same gap between a purchase price and a sale price also appears in the SEC's discussion of internalization and of effective spreads on national market system stocks.

What is an effective spread?

In the SEC's trade-execution publication, effective spreads are the spreads actually paid by investors whose orders are routed to a particular market center, as disclosed in monthly execution-quality reports.

When do spreads tend to be wider?

When there is less trading activity. The SEC's after-hours publication lists larger quote spreads as a risk of trading outside the regular 9:30 a.m. to 4:00 p.m. Eastern session.

Disclosures

Editor holdings: The editor holds no position in any company named on this page. As of Nov 11, 2026.
Compensation: Nobody paid for this page. No affiliate links on this page.
Sources: Each company's own SEC filings, linked next to each number.
Last updated: Nov 10, 2026

General education, the same for every reader. Not a recommendation to buy, sell or hold any security, and it doesn't consider your situation.

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