Ask
Candlefocus EditorThe size of the spread and its liquidity are influenced by many factors, including market structure, cost structure, demand and supply levels, and the characteristics of the securities themselves. Bids and offers change constantly, reflecting shifts in demand and supply, as well as rising or falling interest rates. Spreads in some markets and for some products may be wider or narrower than spreads in another market or for another product.
In order for a market to be liquid, there must be enough buyers and sellers for the market maker to buy and sell at a fair price without having to hold on to the asset for too long. This is why the size of the spread impacts the liquidity of a market and whether or not it is attractive to investors. For example, if a market’s spread is very wide, but the liquidity is low, it will appear less attractive to investors, and they may hurt the market’s liquidity further by staying away.
Ask prices provide investors an incentive to buy securities, as they know they will get the stated ask price when they purchase the security. This provides investors with a degree of certainty that they won’t be paying too much for the asset, so long as the ask price remains stable prior to their purchase. However, it should be noted that ask prices can change very quickly due to market activity, so it is important for investors to remain vigilant to ensure they are receiving the asked for price for their trades.