Spread

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The spread in financial markets (the "bid/ask spread") refers to the difference between the bid (highest buying) price and the ask (lowest selling) price for a security or commodity. Spreads, by distinction, are trading strategies that help traders in different markets exploit the spread.

In futures trading, the spread is the sale of one or more futures contracts and the purchase of one or more offsetting futures contracts. The spread tracks the difference between the price of whatever it is you are long and whatever it is you are short. Therefore the risk changes from that of price fluctuation to that of the difference between the two sides of the spread.[1]

On the stock market the spread for stocks is determined by several factors, including float (the number of shares outstanding), demand for the shares and their total trading activity. In commodity markets spreads also reflect the carrying charges and holding costs for a commodity.[2]

In sports-betting markets the term refers to a common form of handicapping where the bookmaker or line-setter assigns the underdog a certain number of advance points, called the spread, to make the contest more "even".[3] That means speculators on either side of the spread bet must wager $110 to win $100.

References

  1. What is a Spread?. spread-trading.com.
  2. Commodity Spreads. Keystone Marketing Services.
  3. Point Spread Bets. GamblersPalace.com.