Offer definition
What is the offer price?
The offer price is the price at which you – the trader – can buy the underlying asset from a broker or market maker. From the perspective of the market maker, the offer price is the price at which they are willing to sell the underlying.
The offer price is one of the two prices quoted when trading financial assets, the other being the bid price. The difference between the offer and the bid is called the spread – this is the fee traders pay to open positions. Therefore, the offer price is the slightly higher than the market price, while the bid price is slightly lower.
The offer price can also be called the ask price or the asking price. So, sometimes you might see the spread referred to as the bid-ask spread, instead of the bid-offer spread.
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Offer price examples
Let’s take a look at two examples of an offer price: one for shares and one for forex.
Say Barclays shares are trading at 148.760 with an offer price of 148.780 and a bid price of 148.740. You think the share price will rise, so you open a CFD to buy (go long on) five contracts at 148.780.
After a week, the share price has risen in your favour and is now trading at 151.760 with an offer price of 151.780 and a bid price of 151.740. To close your position and take your profit, you reverse the trade by selling your shares at the bid price.
Now, let’s look at the forex market. GBP/USD is trading at 1.32575 with an offer price of 1.3262 and a bid price of 1.3253. You believe that the GBP will strengthen at the next interest rate announcement, so you decide to buy five contracts at 1.3262 . Remember, when trading GBP/USD, you are buying GBP and selling USD at the same time.
After a week, GBP/USD rises to 1.33175 with an offer price of 1.3322 and a bid price of 1.3313 and you decide to close your position and take profit. You reverse your trade to close your position, so you sell five contracts at 1.3313.
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