Bid-ask spread: reading the two-sided quote before you trade

Start in plain English

When a beginner asks "what's the price?", the honest answer is "which one?". A live stock quote has two sides: what buyers are bidding and what sellers are asking. This lesson shows how to read that quote, measure the gap between the two sides, and see what crossing it costs. For a small-cap day trader the gap is often wide, and it is paid before the stock moves at all.

The core idea: the bid-ask spread is the ask minus the bid. An order that must fill now buys at the ask or sells at the bid, so a round trip pays the spread. To compare stocks, measure the spread as a percentage of the midpoint, not in cents.

Read the quote line

A quote has four parts you should name separately:

• Bid: the highest displayed price someone is currently willing to pay, with the number of shares wanted.
• Ask, also called the offer: the lowest displayed price someone is currently willing to sell at, with the number of shares offered.
• Spread: ask minus bid.
• Last: the price of the most recent reported trade. It is history, not a price still on offer.

A quote line often looks like this (Illustrative):

3.40 × 3.46 12 × 5

Read it as: best bid $3.40, best ask $3.46, sizes 12 and 5. Many platforms show size in round lots of 100 shares, so "12 × 5" can mean 1,200 shares bid and 500 shares offered. Others show raw shares. Check your platform's setting before you read size.

Worked example: what crossing the spread costs

All prices in this example are Illustrative. Copperleaf Robotics is fictional.

Copperleaf Robotics is quoted $3.40 × $3.46, sizes 12 × 5 in round lots. The last trade was $3.43. You buy 500 shares with an order that fills immediately at the ask, and a moment later the quote is unchanged.

• Cost to buy: 500 × $3.46 = $1,730.00, before fees.
• Value if you sold straight back at the bid: 500 × $3.40 = $1,700.00.
• Difference: −$30.00, exactly the $0.06 spread times 500 shares.

Nothing moved against you. You crossed the spread once on the way in and would cross it again on the way out. The last price, $3.43, played no part: no seller was offering shares at $3.43.

Now put the cost in percent. The midpoint is ($3.40 + $3.46) ÷ 2 = $3.43, and the spread is $0.06 ÷ $3.43 = 0.0175, or 1.75% of the midpoint. To break even before fees, the bid has to rise from $3.40 to your $3.46 purchase price, a move of 1.76% from the bid, just to get back to zero.

The conclusion: the spread is a cost you pay before the stock does anything, and it is known before you click. Read it first, in percent, and compare it with the move you are expecting. The rest of this lesson covers where the best prices come from, how to compare spreads across stocks, tick-size rules, and why spreads change during the day.

Compare spreads in percent, not cents

A $0.06 spread means very different things on a $0.60 stock and a $60 stock. Traders therefore divide by the midpoint:

midpoint = (bid + ask) ÷ 2 spread % = (ask − bid) ÷ midpoint

Three fictional stocks at the same moment (Illustrative):

Quillfeather's spread is under one cent, the smallest in dollars, yet in percent it costs more than 50 times as much as Harborview's. When you compare names, compare percent and write down the denominator. Some tools divide by the bid or the ask instead of the midpoint, which gives slightly different numbers: Quillfeather is 1.29% of the bid and 1.27% of the ask.

Where the best bid and ask come from

US stocks trade on many venues at once: several exchanges plus off-exchange venues. Each exchange displays its own best prices. The national best bid and offer (NBBO) is the highest bid and the lowest offer across those displayed exchange quotes, calculated and published continuously by the consolidated data processors.

Two practical consequences:

1. Your screen may not show the NBBO itself. Some platforms display the consolidated quote; others build their own view from direct exchange feeds. Small timing differences are normal.
2. Trades can print inside the spread. Off-exchange venues and midpoint orders can execute between the bid and the ask, which is one reason the last price can sit between them.

Regulatory status (as of 2026-10-06). Regulation NMS Rule 611, the trade-through rule, generally requires trading centers to have policies that prevent trades during regular trading hours at prices worse than another venue's protected quote. Rule 610(e) restricts displaying quotes that lock or cross another venue's quote. On 2026-06-11 the SEC proposed rescinding both (Release 34-105655). The comment period closed on 2026-08-17, and the proposal had not been adopted as of this check. Both rules remain in effect until the SEC acts; re-check before relying on either.

Tick size: the smallest step a quote can take

Quotes cannot be any price. Under SEC Regulation NMS Rule 612, as applied today, displayed quotes and orders in stocks priced at $1.00 or more move in increments of $0.01. Below $1.00, the minimum increment is $0.0001, which is why Quillfeather shows four decimals.

The rule governs quotes and orders, not every trade. Some executions, such as midpoint trades, print at sub-penny prices.

In 2024 the SEC adopted a half-penny ($0.005) increment for stocks at $1.00 or more whose time-weighted average quoted spread is $0.015 or less. That amendment is not in force yet. On 2026-06-11 the SEC extended compliance relief to the first business day of November 2027 (Release 34-105656). Because it targets stocks quoted a penny or two wide, it is less likely to touch thin small caps with wide spreads. Tick size and sub-penny rules covers the details.

Why spreads widen and narrow

A spread is not a fixed property of a stock. The same stock can carry very different spreads on the same day:

• Session. Premarket and after-hours quotes are usually thinner; see Premarket and after-hours trading hours.
• News. When new information arrives, liquidity providers often step back until prices settle.
• The open. The opening auction sets one price; continuous trading right after it can be jumpy.
• Halts and pauses. Quotes can be wide just before a pause and just after trading resumes; see What happens to your orders during a halt or pause.
• Price and activity. Low-priced, thinly traded stocks often carry wider percentage spreads, a tendency rather than a rule.

A locked quote (bid equals ask) or a crossed quote (bid above ask) on your screen usually reflects timing differences between venues or feeds and tends to resolve quickly.

The spread against the move you expect

The spread matters most relative to the move a trade is aiming for. A second example, also Illustrative: you buy Copperleaf Robotics at the $3.46 ask, and the whole quote then rises by $0.15, to $3.55 × $3.61.

• If you sell at the new bid, $3.55, you keep $0.09 per share: 500 × $0.09 = $45.00 before fees.
• The quote moved $0.15, but you captured only 60% of it. The $0.06 spread took the other 40%.

Run the same $0.15 move on Harborview Utilities, quoted a cent wide: buying at the ask and selling at the new bid keeps $0.14 of it, about 93%. The move is identical; the spread decides how much of it you can keep.

This is why traders check the spread before choosing an order type. An order that must fill now pays the spread. An order that waits at its own price may avoid paying it, but may not fill. Market vs limit orders works through that trade-off.

Observe vs. infer

The quote line invites stories. Keep what the screen shows apart from what you might read into it.

Common mistakes

• Estimating cost from the last price. An order that must fill now meets the ask to buy or the bid to sell. Price improvement is possible but not something to plan on.
• Comparing dollar spreads across prices. One cent on a $0.60 stock can cost more than five cents on a $45 stock.
• Reading size in the wrong unit. "5" may be 5 shares or 500.
• Treating displayed size as available. Size at the best price covers only what is displayed, and it can change before your order arrives. Deeper layers are the subject of How to read Level 2.
• Assuming half-penny ticks are live. As of 2026-10-06 they are adopted but deferred to November 2027.

Apply it in FennEdge

• FennEdge's research tools do not show a live two-sided quote. Before acting on anything from the Scanner (paid: Plus, Pro and Max), check the bid, ask and sizes on your trading platform. The Scanner has no spread filter as of 2026-10-06.
• After the session, open the Trading Journal, which holds broker-synced fills only. Compare each fill with the bid and ask you noted when you entered. On Pro and Max, the Fees page shows commissions and fees separately when your broker's sync includes them, so spread, slippage and fees are not lumped together.
• Add a "spread at entry (%)" field to your own notes. After a few weeks you can see whether the stocks you trade are cheap or expensive to cross.

What this lesson does not claim

• It does not claim that a narrow spread makes a stock a good trade, or that a wide one rules it out.
• Spread percentages here use the midpoint. Other tools may use the bid or the ask.
• The Rule 611/610(e) proposal and the half-penny relief are dated statuses as of 2026-10-06 and can change.
• Copperleaf Robotics, Quillfeather Mining and Harborview Utilities are fictional.

Go deeper

• Measuring the cost on your own fills. Slippage separates spread, slippage and fees, and Is it liquid enough to scalp? combines spread with dollar volume and depth.
• Tick rules in depth. Tick size and sub-penny rules.
• Next lesson: Market vs limit orders.

Exercises

Three exercises follow: a concept check on today's minimum quoting increment, a calculation of a sub-dollar spread as a percentage of the midpoint, and a premarket scenario about what an immediate buy order can expect from the quote on screen. Exercises, answers and progress are available after signing in.

Primary sources

• 17 CFR 242.612. Rule 612: Minimum pricing increment.
• US Securities and Exchange Commission. Release 34-105656: temporary exemptive relief from the amended Rules 610(c) and 612 until the first business day of November 2027 (2026-06-11).
• US Securities and Exchange Commission. Release 34-105655: proposed rescission of the trade-through rule and the locked and crossed markets provisions (2026-06-11), and the press release.
• 17 CFR 242.600. Regulation NMS definitions, including national best bid and offer and trade-through.
• US Securities and Exchange Commission. Responses to FAQs concerning Rule 611 and Rule 610 of Regulation NMS.

Sources checked 2026-10-06. All companies, quotes and calculations in this lesson are fictional and Illustrative. This lesson is education, not a recommendation to buy or sell any security. Past patterns do not indicate future results.