What Is An Ask?

Ask: Stock Price Info

In stock trading, there always exists an ask price, or offer amount, for any stock, bond, currency, or other financially traded security.  The ask price simply is how much the seller wants for their security.  This is not however the selling price.  The selling price will be determined based on what the seller and the buyer actually agree on.  The ask amount is more like the starting price in a stock trade transaction.  Much like with a dealer and a car’s sticker price, the ask price is where the seller states how much they want for their stock or security.  Just like in car selling, the sticker price is most often not the actual purchase price.  The price is negotiated between the bid price, the buyers offer amount, and the ask price.  The only major difference in ask prices with stocks is that there is not much negotiation.  A percentage point or two possibly, but the difference between bid and ask prices are not that significant.

Why Ask Price

An ask price is necessary in order to affect trades.  Just like with any other asset, be it a home, a car, or other, the value of anything is really determined just by what another party is willing to pay for it.  The same holds true with stocks. A stock may be worth $35 a share, but if there is no buyer available willing to purchase it, then its worth far less.  In stock trading most stock purchases are grouped together until a price and quantity limit is reached.  This is necessary as it is often the case that what one party is selling is not exactly what another wants or needs.  For example an investor selling 250 shares may be grouped together with another few sellers to equal the 1,000 shares that another buyer of that stock actually wants.  The stock being sold will have the offer price, the ask, while the stock being bought will have a best bid price, meaning the highest they will pay per share for 1,000 shares.  When there is a match, the stock trade transaction will be executed.

Ask Price And Stock Values

Another interesting detail about ask prices is that they help compute the amounts we see in stock tickers and in newspapers reporting stock value.  Since the ask and bid price cannot be published for obvious reasons, too much data, an average price is given.  In this the best bid price, or offer price, is averaged with the best ask price.  The average is listed as the stocks actual trading value for a given day.

Related posts:

1. What Is A Bid?
2. How Do A Bid And Ask Work In Stock Trading?
3. What Is An Option?
4. What Is A Call?
5. What Is A Covered Call?