Basics

Bid Ask Spread: What the Spread in Stocks Is and What It Costs You

Level: Beginner · 8 min read · Updated October 10, 2026

The bid ask spread is the gap between the highest price buyers are offering (the bid) and the lowest price sellers will accept (the ask). Buy at market and you pay the ask; sell at market and you get the bid. A liquid stock quoted $100.00 by $100.01 has a one-cent spread. A thin one quoted $24.80 by $25.20 has a 40-cent spread, about 1.6% of the price, paid before the trade can work.

Below: reading a quote, the spread in cents, percent and R, who sets it, why it widens, market vs limit orders, slippage, the scalper's round-trip cost and the checks to make before you click. All prices are hypothetical, and trading carries real risk.

Two hand-drawn quote ladders side by side: on the left, liquid, with a bid of 100.00 in green, an ask of 100.01 in red and a bracket reading spread 0.01; on the right, illiquid, with a bid of 24.80, an ask of 25.20 and a bracket reading spread 0.40. Arrows note that a market buy pays the ask and a market sell gets the bid.

What is the bid ask spread? Bid, ask and last price

Every stock has two live prices. The bid is the highest price someone is willing to pay right now; the ask, also called the offer, is the lowest price someone is willing to sell at. The spread is the ask minus the bid, and the midpoint sits halfway between them.

The big number on a quote screen is usually the last price: where the most recent trade printed. It is history, not an offer. Hypothetical: the last trade was at $50.00, but the quote is now $49.97 bid and $50.03 ask. A market buy pays about $50.03, and selling straight back gets about $49.97, six cents less.

Each side also shows a size, the number of shares displayed at that price. The drawing at the top compares a liquid quote with an illiquid one; more terms are in the trading glossary.

Bid: The highest price a buyer will pay right now. A market sell order generally fills at or near it.
Ask (offer): The lowest price a seller will accept right now. A market buy order generally fills at or near it.
Spread: The ask minus the bid. You pay about one spread per round trip, and it widens when trading is thin.
Last price: The price of the most recent trade, not necessarily the price your next order will get.

How to calculate the spread: cents, percent and share of your stop

The spread in cents tells you little on its own. Three more numbers make it useful, each one line of math:

Spread = ask − bid. The liquid quote in the drawing: $100.01 − $100.00 = $0.01. The illiquid one: $25.20 − $24.80 = $0.40.
Spread % = spread ÷ midpoint × 100. One cent on a $100 stock is about 0.01%; 40 cents on a $25 stock is 1.6%. A 5-cent spread is 1% of a $5 stock but only 0.02% of a $250 stock.
Spread as a share of your stop = spread ÷ distance to the stop. This is the number that matters to a trader: a 4-cent spread with a 20-cent stop costs 20% of your risk, or 0.2R, the moment you enter.
Spread cost in dollars = spread × shares. Buying 500 shares through a 4-cent spread and selling them straight back costs $20.

Who sets the bid and ask? Market makers and liquidity

Two groups build the quote. Market makers are firms that, in the SEC's words, stand ready to buy and sell a particular stock on a regular and continuous basis at a publicly quoted price. And every trader with a limit order adds to it: a resting buy limit is a bid, a resting sell limit is an ask.

The quote you see is the best of them across US exchanges, the national best bid and offer (NBBO). A market maker that buys at the bid and sells at the ask earns the difference when it manages both; the spread pays for the risk of holding shares while prices move.

Competition keeps spreads tight. The busiest ETFs have so many buyers, sellers and market makers that their spread is often a cent in regular hours; a small, quiet stock has few, so whoever quotes it wants more room. That is liquidity: how easily you can trade your size without moving the price. The relative volume guide shows how to compare volume with normal.

Why spreads widen: thin volume, extended hours, news and cheap stocks

A spread widens whenever fewer people are trading or quoting gets riskier. The clock matters most, as the drawing below shows: pre-market runs from 4:00 to 9:30 a.m. ET on sparse volume, the open brings a spike, midday is quieter, and volume returns into the 4:00 p.m. close. After-hours runs to 8:00 p.m. ET; your broker may offer shorter sessions.

Hypothetical: a stock is quoted $50.00 by $50.01 at 3:55 p.m. ET. After earnings at 4:10 p.m., it is quoted $49.70 by $50.20, a 50-cent spread. Crossing it costs more than a 30-cent day-trade stop before the price moves at all. See pre-market trading for those sessions and US stock market hours for the times in your city.

Low volume: a thinly traded stock has fewer quotes competing, so its gap stays wide all day.
Pre-market and after-hours: the SEC notes that less trading activity could mean wider spreads, that news released then can move prices sharply, and that many electronic trading systems accept only limit orders in those sessions.
The first minutes after the 9:30 a.m. ET open, while prices are still settling.
News and earnings: when a big move could come at any moment, liquidity providers quote wider or step back.
Cheap and small stocks: a few cents is a big percentage of a $3 share price.

A hand-drawn volume timeline from 4:00 to 16:00 ET: sparse short bars in the pre-market from 4:00 to 9:30 with the note thin volume, wider spreads, a tall spike at the 9:30 open, lower bars at midday and higher bars again into 16:00, a U shape. Labels: pre-market, 9:30 open, regular session.

Bid ask spreads in options

Option spreads are often far wider than the stock's in percentage terms. Each strike and expiration is its own market, and contracts far from the current price or with little trading can be quoted very wide.

Option prices are quoted per share, and a standard US equity option covers 100 shares. Hypothetical: a call quoted $2.40 bid and $2.60 ask has a 20-cent spread, 8% of the $2.50 midpoint. Buy at the ask and sell straight back at the bid, and you lose $0.20 × 100 = $20 per contract before the stock moves; on ten contracts, $200.

A common approach is a limit order near the midpoint, accepting that it may not fill. See options trading for beginners and the options scalping strategy.

Market vs limit orders: paying the spread or waiting for it

A market order buys or sells at the best available price right away. The SEC notes that execution is generally immediate but the price is not guaranteed, and that the last-traded price is not necessarily the price you will get. In practice, a market buy crosses the spread and pays the ask.

A limit order sets your price or better: a buy limit fills only at the limit or lower, but it may never fill. Hypothetical, with the illiquid quote from the top drawing, $24.80 by $25.20: a market buy pays about $25.20. A buy limit at $25.00 saves 20 cents if a seller comes down to it; if price runs to $25.60 without you, the missed move is the price of that control.

The drawing below is the map: buy limits rest below the price and sell limits above it; buy stops rest above and sell stops below. A stop becomes a market order once triggered, so it pays the spread and can slip, most of all in thin stocks. The order types guide covers each one.

Wide spread, thin stock or extended hours: use a limit order, or skip the trade.
A buy limit at or slightly above the ask usually fills at once if shares are available there, but never above your limit.

A hand-drawn price ladder with price now in the middle: above it a buy stop and a sell limit (take profit), below it a buy limit and a sell stop (stop loss), buy tags in green, sell tags in red, and arrows showing where each order fills.

Slippage: when your order walks through the quote

Slippage is the difference between the price you expected and the price you got. The displayed ask is good only for the shares offered there; a larger market order keeps buying at the next prices up.

The drawing below shows a hypothetical ask ladder: 200 shares at $50.02, 300 at $50.03 and 500 at $50.05. A market buy of 1,000 shares takes all three: 200 × $50.02 = $10,004, 300 × $50.03 = $15,009 and 500 × $50.05 = $25,025, a total of $50,038. The average fill is about $50.04, not the $50.02 on the screen: 1.8 cents a share, or $18 on the order, on top of the spread you already crossed.

In a fast market the displayed size can also vanish before your order arrives. To limit slippage, trade a size that fits the shares displayed, cap your price with a limit order (a buy limit at $50.03 here fills 500 shares and leaves the rest waiting), and avoid market orders in thin stocks and around news.

A hand-drawn ask ladder with 50.02 × 200, 50.03 × 300 and 50.05 × 500 shares; an arrow shows a market buy of 1,000 shares eating through all three levels, with the note average fill ≈ 50.04, not 50.02.

The round-trip cost: why the spread matters most to scalpers

A round trip costs about one full spread if the quote does not move: you pay the ask going in and get the bid coming out, half the spread on each side of the midpoint. A swing trader aiming for dollars barely notices a cent. A scalper aiming for cents feels every one.

Count it in R. Hypothetical scalp, like the plan in the drawing: risk 10 cents to make 20, a 1:2 trade. A 2-cent spread takes roughly 0.2R per round trip, so a full win nets about +1.8R and a full loss costs about −1.2R. The hit rate needed to break even rises from 33.3% to 40% (1.2 ÷ 3.0). With a 1-cent spread it is about 36.7%; with a 5-cent spread, wins and losses are both 1.5R and you must be right half the time. This is arithmetic, not a forecast of how often any setup works.

Then multiply: ten scalps a day at 0.2R each is 2R spent on spreads before commissions, fees or slippage. That is why the scalping strategy guide sticks to the most liquid names, and why a risk reward ratio only means something after costs.

A hand-drawn trade plan: an entry line, a red box down to the stop labeled risk = 1R, a green box up to the target labeled reward = 2R, and a note reading R:R = 1:2.

Practical checks before you trade

Run these checks while you are still flat; in day trading they matter as much as the chart. They take seconds and tell you whether the trade can pay at all.

UpTickFlow, our invite-only TradingView indicator, helps with the chart side: built for liquid US stocks, ETFs and index futures on 5-minute to 1-hour charts, it waits for a candle to close at a level, draws the entry, stop and target before the trade, and stays quiet in the first minutes after the open and in chop. It is a second check, not a scanner; reading the quote before you click is still your job.

Read the bid and ask, not just the last price. TradingView can show bid and ask labels on the price scale and bid and ask lines on the chart.
Work out the spread as a share of your stop. Set a personal maximum, for example a tenth of your risk, and skip anything wider.
Compare your size with the shares displayed. If your order is bigger, expect slippage.
Check the clock: pre-market, after-hours, the first minutes after the open and scheduled news tend to bring wider quotes.
Use limit orders when the spread is wide, and put the spread and expected slippage into your risk/reward and position size.
Log your actual fills next to your planned prices; the gap is your real cost.

Test yourself

4 quick questions on this lesson. Pick an answer to see why.

Question 1 of 4
In the drawing, which quote is cheaper to trade if you buy at market and sell straight back?
Turn your phone sideways to read the drawing. Tap to close.
Question 2 of 4
In the drawing, a market order buys 1,000 shares. About what average price does it pay?
Turn your phone sideways to read the drawing. Tap to close.
Question 3 of 4
Hypothetical: a stock is quoted $20.00 bid and $20.05 ask. You buy 400 shares at market and sell them straight back at market, with the quote unchanged. What did the spread cost you?
Question 4 of 4
Hypothetical: a thin stock is quoted $24.80 bid and $25.20 ask, and you want to buy. Which order makes sure you never pay more than $25.00?

Questions

What is the spread in stocks?

It is the ask, the lowest price a seller will accept, minus the bid, the highest price a buyer will pay. Hypothetical: quoted $49.97 by $50.03, the spread is 6 cents, and buying at market then selling straight back loses about 6 cents a share.

What is a good bid ask spread?

There is no single number. In the most liquid stocks and ETFs it is often a cent during regular hours. For a trader, compare it with your stop: if the spread is a large share of the distance to the stop, the trade starts deep in the hole.

Why is the spread so wide in pre-market and after-hours?

Fewer people trade, so fewer quotes compete; the SEC notes that less trading activity could mean wider spreads, and news released outside regular hours can move prices sharply. Many trading systems accept only limit orders then, so check your broker.

Do you pay the bid ask spread twice?

No, about once per round trip. You buy at the ask and sell at the bid, so if the quote does not move you lose one spread, half on the way in and half on the way out. Slippage, commissions and fees come on top.

UpTickFlow is our product. These guides are education, not financial advice. Trading involves a substantial risk of loss.