Two-Way Quote
A two-way quote indicates the current buying (bid) and selling (ask) prices of a financial security. It consists of the bid price, which is the maximum price a buyer is ready to offer, and the ask price, the minimum a seller is willing to accept for the security.
Definition and Structure
Traditionally, a two-way quote is expressed as 'bid price / ask price'. It's a standard format across various financial markets such as stocks and foreign exchange, offering insights into the security's market depth and the difference between buying and selling prices.
Practical Examples
Consider a stock quoted at $52 / $52.15, indicating a bid of $52 and an ask of $52.15. This scenario illustrates the buyer's highest offer and the lowest price a seller is willing to accept. In the context of the EUR/USD currency pair, a quote might appear as 1.1870/1.1872, where 1.1870 is the bid and 1.1872 the ask price, showing the cost to sell or buy one Euro in USD, respectively. The minor difference, termed the spread, signifies the trading cost, influencing profitability and reflecting the security's liquidity and market efficiency.