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The spread is commonly expressed as the percentage difference between the bid and offer price with the offer used as the denominator, in other words for a company with bid and offer prices of 8p and 10p the spread is 20%. It is the profit the market maker would accrue if they sold you a stock and then immediately bought it back. As we elaborate later on in the article this is an important distinction since the percentage difference using the bid as the denominator is much more pertinent from the investor’s point of view, it being the amount a stock has to go up before they break even. In the above example the stock may be promoted/largely understood as having a 20% spread but the investor needs to make 25% to just break even.
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