What Is a Bid Price?

A bid price is a price for which somebody is willing to buy something, whether it be a security, asset, commodity, service🤪, or contract. It is colloqui🍒ally known as a “bid” in many markets and jurisdictions.

Generally, a bid is lower than an offered price, or “ask” price, which is the price at which people are willing to sell. The difference between the two prices is called a 澳洲幸运5开奖号码历史查询:bid-ask spread​​​​​​​.

Bids are made continuously by market makers for a security and may also be made in cases where a seller 澳洲幸运5开奖号码历史查询:requests a price where they can sell. Sometimes, a buyer will present a bid even if a seller is not actively looking to sell, in which case it is considered an 澳洲幸运5开奖号码历史查询:unsolicited bid.

Understanding Bid Prices

The bid price is the amount of money a buyer is willing to pay for a security. It is contrasted with the sell (ask or offer) price, which is the amount a seller is willing to sell a security for. The difference between these two prices is referred to as the spread. The spread is how 澳洲幸运5开奖号码历史查询:market makers (MMs) derive prof𓂃its. Thus, the higher the spread is, the greater the 🔥profit.

Bid prices are often specifically designed to exact a desirable outcome from the entity maജking the bid. For example, if the ask price of a good is forty dollars, and a buyer wants to pay thirty dollars for the good, they might make a bid of twenty dollars, and appear to compromise and give up something by agreeing to meet in🎃 the middle—exactly where they wanted to be in the first place.

When multiple buyers put in bids, it can develop into a biddi🔯ng war, wherein two or more buyers place incrementally higher bids. For example, a firm may set an asking price of five thousand dollars on a good. Bidder A might make a bid of three thousand dollars. Bidder B may offer three thousand and five hundred dollars. Bidder A might counter with four thousand dollars.

Eventually, a price will be settled upon when a buyer makes an offer which their rivals are unwilling to top. Thiꦗs is quite beneficial to the seller, as𒁃 it puts a second pressure on the buyers to pay a higher price than if there was a single prospective buyer.

In the context of stock trading, the bid price refers to the highest amount of money a prospective buyer is willing to spend for it. Most quote prices as displayed by quote services and on stock tickers are 澳洲幸运5开奖号码历史查询:the highest bid price available for a given good, stock, or commodity. The ask or offer price displayed by said quote services corresponds directly to the lowest asking price for a given stock or commodity on the market. In an options market, bid prices can also be market-makers, if the market for the options contract i🎃s illiquid or lacks enough liquidity.

Buying and Selling at the Bid

Investors and traders that initiate a 澳洲幸运5开奖号码历史查询:market order to buy will typically do so at the current ask price and sell at the current bid price. 澳洲幸运5开奖号码历史查询:Limit orders, in contrast, allow investors and traders to place a buy order at the bid price (or a꧑꧋ sell order at the ask), which could get them a better fill.

Those looking to sell at the market price may be said to "澳洲幸运5开奖号码历史查询:hit the bid."

Bid Size

In addition to the price that people are willing to buy, the amount or volume bid for is also important for understanding the liquidity of a market. 澳洲幸运5开奖号码历史查询:Bid sizes are typically displayed 🥀along with a level 1 quote. If the quote indicates a bid price of $50 and a bid size of 500, that you can sell up to 500 shares at $50.

Bid size may be contrasted with the ask size, where the ask size is the amount of a particular security that investors are offering to sell at the specified 澳洲幸运5开奖号码历史查询:ask price. Investors interpret differences in the bid size and ask size as representing the 澳洲幸运5开奖号码历史查询:supply and demand relationship for that security.

Example of Bid Price

Suppose Alex wants to buy shares in company ABC. The stock is trading in a range between $10 and $15. But Alex is not willing to pay more than $12 for them, so they place a limit order of $12 for ABC's shares. This is their bid price.