What is Offer Price in Stock Market
When you trade in the stock market, you come across two prices: the offer price and the bid price. The offer price is the price at which you can buy a stock from a broker. This price is slightly higher than the market price.
In this guide, you will learn what an offer price is, how it works, and other essential details.
Understanding Offer Price Meaning in Stock Market
An offer price is the amount at which a trader can purchase underlying securities from a broker or market maker. For the market maker, it is the price at which they are willing to sell an asset.
In the trading market, an offer price is the price per share at which you can buy securities. Commonly known as the ask or asking price, it is usually the lowest price at which the broker is willing to sell the stock to the investor.
Another price that comes along with an offer price in the share market is the bid price, which is the highest rate a buyer agrees to pay for an investment security. An offer price is slightly above the market price, while the bid price is slightly below.
The difference between an offer price and a bid price is known as the spread value. It is the fee traders have to pay to open a position.
How Does Offer Price Work
Now that you have learnt what is the offer price meaning, let us take an example to understand the workings of an offer price.
Suppose you buy shares of ABC Limited. On the trading platform, you will find two prices listed:
Bid price: ₹1,650
Offer price: ₹1,670
Here, the offer price is the lowest price a seller is willing to accept for their shares of ABC Limited. If you want to buy the shares immediately, you will need to pay ₹1,670 per share.
However, if you think this price is too high and you are not in a hurry, you can place a bid at a lower price, such as ₹1,650, and wait to see if the seller agrees to that price. The difference between these two prices (₹1,670 - ₹1,650 = ₹20) is known as the spread.
The Bottomline
Understanding the concept of an offer price in the stock market helps you make better investment decisions.
Knowing how these prices work and recognising the spread will help you navigate the market effectively. Additionally, you must note that in a fast-moving market, these prices can change quickly.
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