When investors look up security prices in their trading accounts, they see two pricing figures -- the bid and ask prices. Bid prices are the current prices market participants are willing to pay; ask prices are the prices at which market participants will sell. The difference between the two is the bid-ask spread.
Look up the desired security pricing using your trading account website or the website of an online broker that offers quotes without requiring an active account. For example, the E-Trade website allows quote look-up from the homepage without requiring an account or sign in. Enter the stock symbol to find prices. Select option chains after looking up the underlying stock to find option prices..
Write down the bid and ask price of the selected security. For example, in September 2010, Aegean Marine Petroleum Network -- stock symbol ANW -- had a bid price of $17.09 and an ask price of $17.27.
Subtract the bid price from the ask price for the bid-ask spread. In the ANW example, the spread is 18 cents.
Divide the bid-ask spread amount by the ask price to convert the spread to a percentage. For the ANW example, dividing 18 cents by $17.27 results in a spread of 1.04 percent.
The bid-ask spread can range from a penny on actively traded stocks to 25 percent or more on options with low volume trading. If you buy a security at the ask price, it must move up by more than the bid-ask spread plus any commissions paid before the trade is in a profit position. Bid-ask spreads widen significantly when the market is closed.
Tim Plaehn has been writing financial, investment and trading articles and blogs since 2007. His work has appeared online at Seeking Alpha, Marketwatch.com and various other websites. Plaehn has a bachelor's degree in mathematics from the U.S. Air Force Academy.