The ask, also known as the offer price, is the price a seller is prepared to take for a security. The quantity of the security that may be offered at the given price is also indicated in the ask quote along with the price. The ask will always be higher than the bid since the bid is the price a buyer is willing to pay for a security.
Meaning of Ask
When trading and investing, stocks, bonds, foreign currency, or derivatives, hearing the terms "bid" and "ask" is extremely common.
For instance, if a buyer offered to sell 100 shares for $15.70 each, that would be a "ask" in the stock market.
It is common knowledge that the ask is always greater than the bid, and that the spread between the two equals the difference between the two prices. A bigger spread makes it tougher to profit because the security is continually bought high and sold low.
Investments Grow
In the past stock prices were previously quoted to the nearest sixteenth. In 2001, that changed and it was converted to a decimal format, lowering the minimum possible spread from $.0625, or 1/16 of a dollar, to a cent. Nominal spreads will vary in size based in part on the stock's market price.
Currency Variations
The wholesale market, where banks and other financial institutions do business, has narrow spreads. Because the value of a point varies among currencies, so do the spreads. The margin between buying and selling Euros and US Dollars typically ranges from one to two points.
Bid-ask spreads for transactions involving foreign currencies, such as the euro and British pound, or euro and the Japanese yen, are typically twice as large as those involving the dollar. This is an indication of more volatility and decreased trade volume.
Due to the rise of computerized dealing systems, retail market spreads have shrunk significantly. These tools give independent traders the same access to market data as giant banks and brokerages. Because of this, point spreads have dropped to the low single digits on multiple occasions.
Yield Variation on Bank Notes
The market for buying and selling foreign currency banknotes is distinct from the wholesale and retail FX markets. Expect spreads to be 75 pips or higher.