What does it mean if the spread is temporarily shown to be 0?
frictionless asset
The size of the bid–ask spread in a security is one measure of the liquidity of the market and of the size of the transaction cost. If the spread is 0 then it is a frictionless asset.
What does it mean when there is a large spread between bid and ask?
Market makers often use wider bid-ask spreads on illiquid shares to offset the risk of holding low volume securities. They have a duty to ensure efficient functioning markets by providing liquidity. A wider spread represents higher premiums for market makers.
What does it mean when the bid and ask are zero?
In general, a zero bid just means that nobody wants to buy these options. They are worthless. Market making firms will quote an offer so that if you’re short the option and want to cover you’ll be able to but for all practical purposes, these options aren’t trading.
What does the spread between the bid and asked Bond prices represent?
The difference between bid and ask prices, or the spread, is a key indicator of the liquidity of the asset. In general, the smaller the spread, the better the liquidity.
Is a large bid/ask spread bad?
Although it could be a very low liquidity stock as many answers here have suggested, the ask bid spread is so wide, it most likely indicates that the stocks market is closed for the day and there’s just a few stink orders still sitting there.
What does spread mean in trading?
Generally, the spread refers to the difference between two prices, rates, or yields. In one of the most common definitions, the spread is the gap between the bid and the ask prices of a security or asset, like a stock, bond, or commodity.
How do brokers make money from bid/ask spread?
Normally, the ask price is higher than the bid price, and the spread is what the broker or market maker earns in profit from managing a stock trade execution. After all, in a bid-ask scenario, the buyer is being asked to pay the higher price (the ask) and the seller is being asked to accept the lower price (the bid.)