Summary
The Bid-Offer Spread is the difference between the Best Offer and the Best Bid in the Orderbook.
It represents the gap between the highest displayed price a buyer is willing to pay and the lowest displayed price a seller is willing to accept.
Why it matters
The spread is an important measure of immediate market liquidity and the potential cost of trading. A narrower spread generally means the best available buying and selling prices are closer together, while a wider spread means they are farther apart.
All else being equal, a narrower spread may make it easier to enter or exit a position close to the current market price.
How it is calculated
Bid-Offer Spread = Best Offer − Best Bid
The result is usually shown in the security’s quoted price units. Some market views may also express the spread as a percentage.
How to read it
A small spread can indicate more competitive visible liquidity at the top of the Orderbook. A large spread can indicate lower liquidity, greater uncertainty, higher volatility, or limited current order interest.
The quantities available at the Best Bid and Best Offer are also important. A narrow spread with very small quantities may not provide sufficient liquidity for a larger order.
Things to keep in mind
The spread can change quickly as orders are entered, executed, amended, or cancelled. It is not a fixed transaction cost and does not include commissions, fees, taxes, or the effect of an order moving through multiple price levels.
The spread may be unavailable when there is no valid bid, no valid offer, or insufficient current Orderbook data.