spread

Spread

1. The difference between the bid and the ask prices of a security or asset.

2. An options position established by purchasing one option and selling another option of the same class, but of a different series.

Notes:

1) The spread for an asset is influenced by a number of factors, such as:

a) Supply or "float" (the total number of shares outstanding available to trade).
b) Demand or interest in a stock.
c) Total trading activity in the stock.

2) For a stock option, the spread would be the difference between the strike price and the market value.

See also: Ask, Bear Spread, Best Ask, Best Bid, Bid, Bull Spread, Butterfly Spread, Float, Haircut, Market Value, Option, Slippage, Strike Price

---

Spread

(1) The gap between bid and ask prices of a stock or other security. (2) The simultaneous purchase and sale of separate futures or options contracts for the same commodity for delivery in different months. Also known as a straddle. (3) Difference between the price at which an underwriter buys an issue from a firm and the price at which the underwriter sells it to the public. (4) The price an issuer pays above a benchmark fixed-income yield to borrow money.

---

spread

1. A position taken in two or more options or futures contracts to profit through a change in the relative price relationships. Purchasing an option to expire in October and selling an option on the same asset expiring three months earlier is one example of a spread.

2. The difference in price between two futures contracts that are identical except for delivery date.

3. The difference between the bid and ask prices for a particular security. A large spread often indicates inactive trading of the security. Also called markup. See also effective spread, gross spread, narrow the spread.

4. The difference in yields between two fixed-income securities. See also basis point.