The bid-ask spread is the gap between the highest bid (what buyers offer) and the lowest ask (what sellers accept) — an implicit cost paid by whoever trades immediately.
Highly liquid, heavily traded names tend to have narrow spreads measured in a penny or two. Thinly traded stocks can have spreads of 1% or more of the share price, because market makers demand more compensation for holding inventory in a name that doesn't trade often.
A market order always crosses the spread — buying at the ask, selling at the bid — so on a wide-spread stock, a round trip can cost more in spread alone than several days of a narrow-spread stock's typical move. A limit order lets you name your price instead of paying the full spread for guaranteed execution.
Spread width tracks liquidity — heavily traded stocks have narrow spreads; thinly traded stocks have wider spreads because market makers demand more compensation for the risk of holding infrequently-traded inventory.
You only pay it when you actually cross it — it's not an ongoing cost of holding a position, only of entering or exiting one.
Use a limit order instead of a market order — it lets you name your price rather than accepting the current bid or ask, at the cost of no guaranteed fill.
AAPL analysis shows this metric in context, or browse all S&P 500 tickers.
Educational research only — not investment advice.