Skip to main content

Bid - What It Is, How It Works, And Examples

An offer to purchase an asset from a person or business is referred to as a bid. At auctions and on numerous markets, including the stock market, bids are frequently placed by buyers. Companies that compete for project contracts may also submit bids. When placing a bid, a buyer must specify both the amount they are willing to pay for the item and the amount they are willing to spend on it. 1 A market maker's willingness to purchase a security at a particular price is referred to as a bid. However, market makers are also required to display an ask price, unlike retail purchasers.

Understanding Bids
There wouldn't be any kind of market without buyers and sellers. The ability to buy and sell assets is facilitated by each participant. Entities that offer their assets for sale are known as sellers. Customers are people who are interested in making a purchase. The stock market, actions, stores and any other type of marketplaces are the common places where buyers and sellers can meet and do business.
The market in which these items are sold will determine how bids are handled. Bids can be placed in person or online at an auction, while bids for stocks and other assets are typically placed by investors through their brokers. In ce occasion and for some stocks, the bidding process might be kept secret. With this method, bids are submitted sealed to prevent potential controversy.
In business, bids are submitted in order to secure lucrative contracts for certain projects. Packages are sent to prospective bidders as part of the bidding process.
Governments and major enterprises alike issue these type of contracts for building and maintenance projects across several sectors, including security, healthcare, education and infrastructures.

Bid is related to demand, the need or want for something. Ask is related to supply, the availability of something. The difference between the two prices (bid and ask) is called the spread or bid-ask spread. The bid-ask spread is a good measure of the market's perception of supply and demand for a specific equity. 
Bids are made by buyers to purchase products and services they want and/or need, which includes anything of value, such as stocks, bonds, commodities, currencies, or other investments. 
The bid price is the highest price at which a buyer is willing to pay for purchasing a stock or any other security; the ask price is the lowest price at which a seller is willing to sell a stock or any other security. The spread is the quantitative difference between the bid and the ask.

Example of Bid-Ask Spread
For example the bid for XYZ stock is $10.25 and the ask is $10.28. The bid-ask spread is 3 cents ($0.03). When buying, the buyer pays the higher price: the ask price. When selling, the seller receives the lower price: the bid price. Therefore, the wider the spread the more costly is the transaction for the trader/investor.

Popular posts from this blog

Kal's Option Trade of the Week - NKE Vertical

The market has been range bound for the last few weeks with volatility on the decline, and earnings all over the place.  So where to go to look for a trade? Nike has already had Earnings and is near a low of the year, so seems like a good option.  As a contrarian that can mean only one thing to me: I have to make a trade with the assumption it will go up from here over the next 45ish days. We will do that by making a Long Call Vertical trade to bet that it starts to head up over the next couple months. For more on my trading and how to join me in real time, see below. Watch  the video  to get the details. Kal Trading Risk Disclaimer   All the information shared in this video is provided for educational purposes only. Any trades placed upon reliance of are taken at your own risk for your own account. Past performance is no guarantee. While there is great potential for reward trading stocks, commodities, options and forex, there is also substantial risk of loss. All tr

Mastering Flag Breakouts for Profitable Trading!

    "Flags" are one of the most common chart patterns. Also known as "consolidation" after the stock has moved up, Trading flag breakouts often provide favorable risk-reward ratios.  By defining specific entry and exit points, you can assess the potential profit relative to the risk taken. This risk-reward advantage enhances your overall profitability when trading flag breakouts, or flag break below. ⚐ Flag breakouts offer a well-defined pattern on the price chart. The consolidation phase forms a distinct flag shape, providing a visual cue  to anticipate a potential breakout. This clarity helps you to feel confident enough when to take the trade.  ⚐ Flag breakouts offer high probability setups: They occur within the context of an existing trend . The consolidation phase represents a temporary pause. Once the breakout occurs, it signifies a resumption of the original trend, leading to strong price movements.  By aligning  trades with the prevailing trend, you can

The Stock Market's Next Move: What Will Happen to Major Indices and Mega Caps?

Today we take a look at the major indices and some of the large caps (AAPL, AMZN, BA, DIS, META, MSFT, GOOG, TSLA, UBER). Watch the video to get the insight and what to expect moving forward. Good Trading! Trading Risk Disclaimer All the information shared is provided for educational purposes only. Any trades placed upon reliance of SharperTrades, LLC are taken at your own risk for your own account. Past performance is no guarantee. While there is great potential for reward trading stocks, cryptos, commodities, options, forex and other trading securities, there is also substantial risk of loss. All trading operations involve high risks of losing your entire investment. You must therefore decide your own suitability to trade. Trading results can never be guaranteed. SharperTrades, LLC is not registered as an investment adviser with any federal or state regulatory agency. This is not an offer to buy or sell stocks, cryptos, forex, futures, options, commodity interests or any other tradi