Glossary
Bid-Ask Spread
The gap between the highest buy price and the lowest sell price for a security.
The bid-ask spread is the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller will accept (ask). It is effectively the round-trip cost of trading a security.
Spreads narrow when liquidity is deep — large-cap stocks during regular hours typically trade at one cent or one basis point. They widen sharply for small-caps, after-hours sessions, and during market stress.
Spread × Average Daily Volume is the rough effective revenue captured by market makers in exchange for providing the continuous two-sided quotes that keep markets liquid.