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Spread

[spred]

What is the definition of Spread?
In finance, spread refers to the difference between two prices, rates, or yields. It can describe the gap between the bid and ask prices of a security, the price difference between buying and selling positions in futures or options for the same commodity but different months, the difference between the price an underwriter buys an issue and the price at which it is sold to the public, or the additional yield an issuer pays over a benchmark rate to borrow money.
Using Spread in an Example

In stock trading, the spread is crucial as it affects the cost of entering and exiting positions. For example, if the bid price of a stock is $50 and the ask price is $51, the spread is $1. This spread can affect the profitability of trading strategies, especially for high-frequency traders.

Using Spread in a sentence

The trader mentioned that the spread between the bid and ask prices was too wide, making it a less attractive buy.

Related Terms

Surviving Spouse

A person whose spouse has died within the tax year and who may file a joint tax return for that year. Additionally, the surviving spouse can file joint returns for the next two years if they remain unmarried and maintain a household as the principal residence for a dependent child.
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Swap

A financial contract in which two parties agree to exchange streams of payments over a specified period, based on different indices such as interest rates, foreign exchange rates, or equity indices, applied to a notional amount. Swaps typically do not involve the exchange of principal.
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