Bid Ask Spread
Bid ask spread is the difference between the best ask and best bid (ask − bid). It is the most basic measure of immediate trading cost.
Definition
Bid ask spread is the difference between the best available sell price and the best available buy price in an order book.
Why it matters
If you buy and then immediately sell (or sell then immediately buy), the spread is the core cost you must overcome. It is the baseline behind many execution cost metrics.
Relation to midquote and effective spread
The midquote is (bid + ask) / 2. If you buy exactly at the ask (or sell exactly at the bid), the effective spread equals the quoted spread.
Common pitfalls
Spread vs real cost: Your real cost can be higher due to slippage and limited depth.
Wide spreads in thin markets: Thin markets often show unstable spreads that widen quickly when you trade size.