Term: Spread

A spread is the gap between two prices quoted for the same thing at the same moment. The most common use of the word in trading is the "bid-ask spread": the difference between the highest price a buyer is currently willing to pay (the bid) and the lowest price a seller is currently willing to accept (the ask, also called the offer).

Every tradeable instrument — a stock, a currency pair, an option, a futures contract — has these two prices sitting side by side at any given instant. If a stock's bid is $10.00 and its ask is $10.02, the spread is $0.02, or two cents. Someone who wants to buy right now pays the ask; someone who wants to sell right now receives the bid. That gap is effectively a built-in cost of trading immediately rather than waiting for a better price.

The nuance that trips people up is that "spread" gets reused for other things too. In options trading, a "spread" often means a strategy where you simultaneously buy one option and sell another (like a call spread or put spread), which is a completely different concept from the bid-ask spread even though it shares the name. Context matters: on a broker's order screen, "spread" almost always means bid minus ask; in an options strategy builder, it usually means a multi-leg position.

Spreads are not fixed. They widen when there are fewer buyers and sellers actively quoting prices (low liquidity) or when volatility spikes, and they narrow when a security is heavily traded and many participants are competing to buy and sell it.