Why a stock can have two prices at once

A stock screen shows $24.90 beside “bid” and $25.10 beside “ask”. A third number shows the last trade at $25.00. Each number can be correct. The last trade is a transaction that already happened. The bid and ask describe prices offered at the time of the quote.

Read the quote from each side

The SEC’s Investor.gov glossary describes the bid as the highest price a buyer is offering for a specified quantity. The ask is the lowest price a seller is asking. Subtract the bid from the ask to find the spread. In this fictional example, it is $25.10 minus $24.90, or $0.20 per share.

If you could buy ten shares at the ask and sell ten back at the bid immediately, the difference would be $2 before fees. That example assumes both quoted prices and the available sizes stay the same through both trades. The quote can change quickly, and an order larger than the available size may fill at several prices.

See what the order controls

The SEC distinguishes market orders, which prioritize execution at available prices, from limit orders, which set a price boundary. A buy limit at $25.00 permits a purchase at that price or less if an order matches. With an ask of $25.10, the existing quoted seller is asking more than the limit. The order can wait for another match or go unfilled, depending on its terms and market conditions.

A market order can execute at prices that differ from a quote or from the last trade, particularly when prices change quickly. The quote is useful context. An execution report gives the actual price or prices received and the quantity filled at each.

Compare prices on the same basis

A 20-cent spread on a $25 stock is about 0.8% of the $25 midpoint. On a $100 stock, the same number of cents is a smaller percentage of its midpoint. State the basis when comparing spreads across stocks. For a given quote, check its timestamp, whether it is delayed and the size displayed. Comparing those fields keeps an old trade, a current quote and an actual execution from being treated as the same number.