3 ms·
spread
by cdelsolar 8y ago
spread
- stochastic_monk 8y agoWhat does that mean, for those of us not in finance?
- throwaway4job 8y agoHe’s referring to the spread between bid and ask prices, but he’s wrong, so you can safely ignore him.
- xcasperx 8y agoThe spread (bid-ask spread) is the difference between the bid (what the seller is willing to accept to sell it) and the ask (what the buyer is willing to pay for it). When you buy a stock, you're buying at the ask price, when you sell you're selling at the bid price. The difference is what the clearer keeps. https://www.investopedia.com/terms/b/bid-askspread.asp https://www.investopedia.com/terms/b/bid-askspread.asp
- pgwhalen 8y agoThis is mostly correct except for the last sentence, for any conventional definition of "clearer." You could replace "clearer" with "market maker" to be more correct, but it is important to note that the market maker isn't earning the spread every time they trade with you. They're only earning the spread in the aggregate, which is to say that they hope to both buy and sell with many people like you so that over time they are effectively earning the spread.
- frutiger 8y agoIf you look on any exchange or broker for any security, the sell price at any given time will almost always be lower than the buy price. The instantaneous gap between the sell price and the buy price is known as the spread. This spread reflects how much the exchange makes.
- vostok 8y agoIt's a very indirect relationship to how much the exchange makes.
- optionsguy 8y agoMarket makers profit off the bid/ask, not exchanges.
- adrr 8y agoThey also get rebates for trades from the exchanges to encourage liquidity.
- pgwhalen 8y agoThis would imply Robinhood is itself is a market maker, which is not true.