Ask

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Ask: Definition, How It Works, and How Spreads Differ Across Markets

What is the ask?

The ask (or offer) is the price at which a seller is willing to sell a security. It is always higher than the bid—the price a buyer is willing to pay. The difference between the ask and the bid is called the spread.

A quoted ask may also include the quantity available at that price. For example, an ask quote shown as “$5.24 × 1,000” means a seller is offering 1,000 shares at $5.24 each.

How the ask and spread affect trading

  • The spread represents a transaction cost: traders buy at the ask and sell at the bid, so wider spreads increase the cost of entering and exiting positions.
  • Spreads can widen sharply during periods of high volatility or when market participants are uncertain about price direction.
  • Spread size depends on liquidity, the security’s price level, and market structure.

Spread conventions by market

Stocks

  • Stock quotes are now in decimals (minimum tick $0.01), so the smallest possible spread is one penny.
  • The nominal width of a spread should be considered relative to the stock price. For example, a $0.02 spread is 0.2% on a $10 stock but only 0.02% on a $100 stock.

Foreign Exchange (FX)

  • Wholesale FX spreads (institutional trading) are typically very tight; retail spreads historically have been wider but have tightened with electronic trading platforms.
  • Spreads vary by currency pair because the dollar value of a pip differs by exchange rate.
  • For EUR/USD, one pip = 0.0001 USD per euro.
  • Example: If you transact $10,000,000 USD at EUR/USD = 1.3300, you are effectively exchanging about 7,518,797 euros. One pip on that position equals roughly $751.88.
  • Cross-currency pairs (e.g., EUR/JPY, GBP/JPY) usually have spreads two to three times wider than pairs versus the dollar due to lower liquidity and higher volatility.
  • Retail electronic platforms have pushed some FX spreads down to as low as 3–10 points on popular pairs at times.

Banknotes (physical currency exchange)

  • The market for physical banknotes is separate from wholesale/retail FX; spreads tend to be much wider—often 75 pips or more—because of handling costs, inventory risk, and lower liquidity.

Key takeaways

  • The ask is the seller’s price; the bid is the buyer’s price; the spread is the difference.
  • Wider spreads increase trading costs and make it harder to profit.
  • Spread size varies by market, liquidity, price level, and volatility; FX pip values depend on trade size and exchange rate.
  • Spreads can widen rapidly during volatile market conditions or when the market faces uncertainty.