Get Spread

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In finance, a spread refers to the difference between two prices, rates, or yields One of the most common types is the bid-ask spread, which refers to the gap between the bid (from buyers) and the ask (from sellers) prices of a security or asset Spread can also refer to the difference in a trading position – the gap between a short position (that is, selling) in one futures contract or currency and a long position (that is, buying) in another

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The middle rate, also called mid and mid-market rate, is the exchange rate between a currency's bid and ask rates in the foreign exchange market.

Spread betting refers to speculating on the direction of a financial market without actually owning the underlying security.

A two-way quote indicates the current bid price and current ask price of a security; it is more informative than the usual last-trade quote.

A futures spread is an arbitrage technique in which a trader takes two positions on a commodity to capitalize on a discrepancy in price.

Quotation is a common term that refers to the highest bid price for a security or commodity and the lowest ask price available for the same asset.

A bid-ask spread is the amount by which the ask price exceeds the bid price for an asset in the market.

Credit Spread vs. Debit Spread: What's the Difference?

After-Hours Trading: Bid and Ask Quote Disparity

Option-Adjusted vs. Zero-Volatility Spread: What's the Difference?

Understanding the Numbers After Bid/Ask Prices

A Breakdown on How the Stock Market Works

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A spread can have several meanings in finance. Generally, the spread refers to the difference between two prices, rates, or yields . In one of the most common definitions, the spread is the gap between the bid and the ask prices of a security or asset, like a stock, bond , or commodity. This is known as a bid-ask spread.

Spread can also refer to the difference in a trading position – the gap between a short position (that is, selling) in one futures contract or currency and a long position (that is, buying) in another. This is officially known as a spread trade.

In underwriting , the spread can mean the difference between the amount paid to the issuer of a security and the price paid by the investor for that security—that is, the cost an underwriter pays to buy an issue, compared to the price at which the underwriter sells it to the public.

In lending, the spread can also refer to the price a borrower pays above a benchmark yield to get a loan. If the prime interest rate is 3%, for example, and a borrower gets a mortgage charging a 5% rate, the spread is 2%.

The bid-ask spread is also known as the bid-offer spread and buy-sell. This sort of asset spread is influenced by a number of factors:

For securities like futures contracts , options, currency pairs, and stocks, the bid-offer spread is the difference between the prices given for an immediate order—the ask—and an immediate sale – the bid. For a stock option , the spread would be the difference between the strike price and the market value .

One of the uses of the bid-ask spread is to measure the liquidity of the market and the size of the transaction cost of the stock. For example, on Jan. 11, 2022, the bid price for Alphabet Inc., Google's parent company, was $2,790.86 and the ask price was $2,795.47. 1 The spread is $4.61. This indicates that Alphabet is a highly liquid stock, with considerable trading volume.

The spread trade is also called the relative value trade. Spread trades are the act of purchasing one security and selling another related security as a unit. Usually, spread trades are done with options or futures contracts. These trades are executed to produce an overall net trade with a positive value called the spread.

Spreads are priced as a unit or as pairs in future exchanges to ensure the simultaneous buying and selling of a security. Doing so eliminates execution risk wherein one part of the pair executes but another part fails.

The yield spread is also called the credit spread . The yield spread shows the difference between the quoted rates of return between two different investment vehicles. These vehicles usually differ regarding credit quality .

Some analysts refer to the yield spread as the “yield spread of X over Y.” This is usually the yearly percentage return on investment of one financial instrument minus the annual percentage return on investment of another.

To discount a security’s price and match it to the current market price, the yield spread must be added to a benchmark yield curve . This adjusted price is called an option-adjusted spread . This is usually used for mortgage-backed securities (MBS), bonds, interest rate derivatives, and options. For securities with cash flows that are separate from future interest rate movements, the option-adjusted spread becomes the same as the Z-spread.

The Z-spread is also called the yield curve spread and zero-volatility spread . The Z-spread is used for mortgage-backed securities. It is the spread that results from zero-coupon treasury yield curves which are needed for discounting pre-determined cash flow schedule to reach its current market price. This kind of spread is also used in credit default swaps (CDS) to measure credit spread.

A yield spread is the difference between yields on differing debt instruments of varying maturities, credit ratings, issuer, or risk level, calculated by deducting the yield of one instrument from the other. This difference is most often expressed in basis points (bps) or percentage points. Yield spreads are commonly quoted in terms of one yield versus that of U.S. Treasuries, where it is called the credit spread.
The option-adjusted spread (OAS) measures the difference in yield between a bond with an embedded option, such as an MBS, with the yield on Treasuries. It is more accurate than simply comparing a bond’s yield to maturity to a benchmark. By separately analyzing the security into a bond and the embedded option, analysts can determine whether the investment is worthwhile at a given price.
The zero-volatility spread (Z-spread) is the constant spread that makes the price of a security equal to the present value of its cash flows when added to the yield at each point on the spot rate Treasury curve where cash flow is received. It can tell the investor the bond's current value plus its cash flows at these points. The spread is used by analysts and investors to discover discrepancies in a bond's price.
Yahoo! Finance. " Alphabet Inc. (GOOGL) ." Accessed Jan. 11, 2022.

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1 a

: to open or expand over a larger area

spread out the map

b

: to stretch out : extend

spread its wings for flight

2 a

: to distribute over an area

spread fertilizer

b

: to distribute over a period or among a group

spread the work over a few weeks

c

: to apply on a surface

spread butter on bread

d (1)

: to cover or overlay something with

spread the cloth on the table

(2)
archaic

: to cover completely

e (1)

: to prepare or furnish for dining : set

spread the table

(2)

: serve

spread the afternoon tea

3 a

: to make widely known

spread the news

b

: to extend the range or incidence of

spread a disease

c

: diffuse , emit

flowers spreading their fragrance

4

: to push apart by weight or force

1 a

: to become dispersed, distributed, or scattered

b

: to become known or disseminated

panic spread rapidly

2

: to grow in length or breadth : expand

3

: to move apart (as from pressure or weight) : separate

1 a

: the act or process of spreading

b

: extent of spreading

2

: something spread out: such as

a

: a surface area : expanse

b (1)

: a ranch or homestead especially in the western U.S.

(2)
Western US

: a herd of animals

c (1)

: a prominent display in a periodical

(2)

: two facing pages (as of a newspaper) usually with matter running across the fold

also

: the matter occupying these pages

3

: something spread on or over a surface: such as

a

: a food to be spread (as on bread or crackers)

a cheese spread

b

: a sumptuous meal : feast

c

: a cloth cover for a table or bed

4

: distance between two points : gap

5

: a commodities market transaction in which a participant hedges with simultaneous long and short options in different commodities or different delivery dates in the same commodity

spreadability
\
ˌspre-də-ˈbi-lə-tē

\
noun

spreadable
\
ˈspre-də-bəl

\
adjective

We spread fertilizer on our yard.

The seeds are spread by wind, birds, and animals.

The fire spread quickly through the building.

The cancer has spread to her throat.

The use of computer technology has spread into all fields of work.

The odor spread throughout the room.

The fashion quickly spread from France to England. Noun

She offered crackers and a cheese spread .

He uses low-fat spread on his toast.

The flames rapidly spread to the tiny town of Weed, a community at the base of Mount Shasta where about a third of its 3,000 residents lives below the federal poverty level.

—

Dustin Gardiner, San Francisco Chronicle , 4 Sep. 2022

The journey from writing The Hobbit to charting Frodo’s ring-fueled burden spread over three decades, and Tolkien’s path to success is not without procrastination and doubt.

—

Emma Fraser, Town & Country , 4 Sep. 2022

The heat dome producing the heat wave will slowly spread eastward into the central and northern plains by mid-week.

—

Nouran Salahieh, CNN , 4 Sep. 2022

Rumors spread in concentric circles, first by word of mouth and then by sensationalized newspaper accounts.

—

Ron Grossman, Chicago Tribune , 4 Sep. 2022

The virus is most commonly spread to humans through the bite of an infected mosquito, according to the U.S. Centers for Disease Control and Prevention.

—

Devi Shastri, Journal Sentinel , 3 Sep. 2022

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