Ask (Securities Trading) - Explained
What is an Ask in Securities Trading
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Table of ContentsWhat is an Ask (Securities)?How is the Ask Price for a Security Used?Stock Market SpreadsForeign Exchange SpreadsAcademic Research on Ask
What is an Ask (Securities)?
The ask price is used in the context of the trade of securities to describe the lowest price a seller is willing to accept before parting ways with a security. Is the price a seller will accept for the sale of a security. The ask price is also called the offer price. The bid price is the opposite of an ask price, this is the highest amount a buyer is willing to pay for a security.
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How is the Ask Price for a Security Used?
In the trade of security, ask and bid go hand in hand, while the seller has the lowest amount he is willing to take in a trade, the buyer has the highest amount he is willing to pay. Conventionally, ask price is often higher than the bid price. The gap between the ask price and the bid price is called the ask-bid spread. Ask and bid prices are features of financial markets, they are used in the trade of financial instruments or securities, including stocks and bonds. For instance, if a seller 's ask is $30 per share, this means a stock of 10 shares will be sold for $300.
Stock Market Spreads
Spread occurs between the ask and bid price in the stock market. While different markets exhibit different spreads at particular times, a wider spread in the stock market makes the market less profitable for investors. There are factors that also contribute to ask-bids spread in the stock market, such as market volatility.
Foreign Exchange Spreads
Spreads also occur in foreign exchange, especially as influenced by diverse currencies. Typically, there is a spread between two currencies, given that their exchange rate differs, for instance, if you compare euro to dollar or dollar to pounds, a spread (difference) exists between the two currencies. In foreign exchange markets where cross-currency transactions are executed, bid-ask spread occurs. While some currencies are two times higher than others, some have much more variance.