What is the Bid Price?

The bid price is the highest price that a prospective buyer is willing to pay for a specific security. The 'ask price,' is the lowest price acceptable to a prospective seller of the same security. The highest bid and lowest offer are quoted on most major exchanges, and the difference between the two prices is called the 'bid-ask spread.'

How Does the Bid Price Work?

Unlike shopping for groceries, in the stock market the buyer also has a say in what price they will pay for a security. The price set by the buyer is the bid price.

When an investor decides he wants to buy a security, he doesn't have to buy it at market price; instead he can use a 'limit order' to specify to his broker that he wants to buy the security, as long as it's under a certain price.

For example, shares of Company XYZ have been trading between $20 and $25 throughout the day. George is interested in buying share of XYZ, but he doesn't want to buy them for more than $22. When he talks to his broker, George tells him that he wants to set a 'limit order' for 100 shares at $22. Because he's indicated a 'bid price,' George's broker will only execute the trade at (or below) that price.

Why Does the Bid Price Matter?

Usually, the bid price for a specific security displayed in most 'quote' services (like Yahoo Finance) is the highest bid price in the market. But investors don't have to buy or sell securities at these prices. Investors can specify their bid price when telling their broker to execute a trade. The trade may not be executed immediately (or even ever, depending on sellers' asking prices), but the buyer can rest assured that he didn't pay more than he intended.

Ask an Expert about Bid Price

All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Bid Price.

Be the first to ask a question

If you have a question about Bid Price, then please ask Paul.

Ask a question
Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

Verified Content You Can Trust
verified   Certified Expertsverified   5,000+ Research Pagesverified   5+ Million Users