What is the Ask Price? | Definition and Example


The ask is the price that the seller demands for the security. It has a similar meaning as asking for a quoted price. It is a price under which a seller does not accept the offer. 

When trading any asset, the buyer puts forth his offer. Whether the transaction will take place or not will depend upon the seller. 

When any buyer wants to purchase an asset, a negotiation follows. Bid and ask is synonymous with negotiation. Usually, a bid is a price the buyer puts forth in front of the seller. The ‘ask’ price is otherwise. Let’s explore the ‘ask’ meaning. 

To purchase security, a trader negotiates with the seller. He presents him with a price that he can pay for the security. If the seller is unsatisfied with the price, he presents his own price. It is what ‘ask’ means.

Ask price in a nutshell

  • It is a quoted price. Ask price is something that a seller quotes to sell his security. 
  • It is the opposite of the bid price.
  • Usually, ‘ask’ price is lower than the bid.
  • The buyer always bids a price lower than the ask. 
  • In binary options, there is no BID and ASK price.

What is an example of the Ask price?

One ‘ask’ example will help you understand the term much better. Suppose you are a trader. You would want to purchase a stock of a good-performing company. For that, you would look for stock sellers. 

Suppose you encounter a seller selling the company’s stock in which you are interested. So, you are willing to buy 10 shares from him for $100 per share. However, it is not an acceptable price to the seller. The seller demands $110 from you for every share you wish to own. So, the deal between the security’s buyer and the seller gets fixed at $110 per share.

You pay the seller a price that he demands. It, thus, is a simple example of an ‘ask’ price. In this case, the $110 the seller demands is the ‘ask’ price. 

There are plenty of real-life ‘ask’ examples. Every moment you enter the market to purchase something, the seller puts forth an ‘ask’ price for you. You pay this price to acquire whatever you wish from the seller. The whole foundation of the trading world has its basis in the bid and ask price

Is there an Ask price in Binary Options trading?

There is no Ask price in the Binary Options instrument. Binary trading involves a fixed price for both buying and selling, known as the strike price.

Example: How does trading a binary option with a strike price work?

Let’s assume you are trading a binary option on the XYZ share. You want to know whether the price of XYZ shares will be above $50 at 2.00 pm today.

Scenario 1: Buying a Binary Option

  • If you believe that the price of the share XYZ will be higher than $50 at the expiry date, you can buy the binary option at the given strike price.
  • If your prediction is right and the share price is higher than $50 at the expiry date, then you will receive a predefined payout. You will lose your initial investment if you are wrong.

Scenario 2: Selling a Binary Option

  • If you think the price of share XYZ will be lower than $50 on the expiry date, then you can sell the binary option at the given strike price.
  • In case your prediction is right and the price of the XYZ share is lower than $50 at the expiry date, you will keep the received reward. Otherwise, if you are wrong, you may have to pay the buyer the predefined payout.

There is no ASK price, so the traders just decide if the market price at expiry will be higher or lower than the strike price.

Why is the Ask price essential in trading?

The term ‘ask’ price has wide connotations in the trading world. To buy security, it is apparent that you need to find a seller willing to sell off the same security. The demand for a price by this seller is inevitable. 

So, you will pay him the price he demands to let you acquire the securities that you hold. It is the whole gist of the ‘ask’ price. A simple statement that would help you know the relevance of the ‘ask’ price is that you cannot settle a transaction without an ‘ask’ price. Your transaction will conclude and settle only after you pay the ‘ask’ price. 

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About the author

Marc Van Sittert
Marc Van Sittert is an experienced Binary Options Trader and coach who is originally from South Africa. He started his career in 2014 by trading old-school Binary Options online. His main focus is on short-term contracts with 60-second trades.

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