A quote can show one price at which buyers are bidding and another at which sellers are asking. Treating those as a single interchangeable price hides the spread between them.
Imagine a bid of $19.80 and an ask of $20.00 for a hypothetical security. The difference is $0.20 per share. Buying at the ask and immediately selling at the bid, with both prices unchanged, would produce that difference as a loss before other costs.
Investor.gov’s ETF investor bulletin explains bid-ask spreads as a trading consideration. The figures here are invented for arithmetic practice, not a live quote or a trading recommendation.
- Bid
- The buying side of the quoted market.
- Ask
- The selling side of the quoted market.
- Spread
- The difference between the two quoted prices.
When reading a worked example, check whether it assumes a single price for entry and exit. That may be a deliberate simplification, but it should remain visible.
Real execution also depends on available quantities, order instructions and market conditions. A quoted spread is useful information; it is not a promise that an entire order will trade at either displayed price.