Difference Between Buy & Sell Stock Prices

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Buy stock prices (the bid) and sell stock prices (the ask) represent two-sides of a financial transaction. The essence of an open financial market starts with these two opposing terms.

Buy Prices

  • The bid stock price represents an investor’s willingness to pay a certain amount to purchase a stock. The buyer stipulates how many shares she wishes to purchase at the bid price.

Sell Prices

  • The ask price represents the amount a seller will accept from a buyer to purchase his stock. The seller also indicates how many shares he has available at the ask price.

The Spread

  • The spread represents the difference between the bid and the ask stock prices. A number of factors influence the spread including the float (total number of available shares to trade), demand in the stock and the stock’s trading activity.

Example

  • Investor “A” has a bid of $11.45 x 1000 shares for stock XYZ, while Investor “B” sets his ask price at $11.45 x 800 shares. Investor “A” buys the 800 shares from Investor “B” and seeks the 200 additional shares elsewhere.

Invisible

  • The negotiations happen invisibly to the investor. The activity gets performed on a trading floor between traders of each security.

References

  • Photo Credit Andrew Burton/Getty Images News/Getty Images
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