What is Bid?
The price of a securities buyer is willing to pay for an asset and is used to indicate standing offers at an auction. Compared to the price the seller is willing to accept which is called the asking price, the bid will always be lower.
Generally speaking, bids can be placed when a seller is not interested in selling an asset, this is referred to as an unsolicited bid. The bid price is generally lower than the asking price, and the difference between an ask and bid price is called a spread. In the stock market, a bid price is the highest price a buyer of a stock will pay for a share. The displayed daily bid price is usually the highest price for a particular share.
A bidding war can take place when more than one party places a high number of bids in quick succession. This is particularly the case when the price paid is greater than the first bid if the bidding is unsolicited or is a larger amount than the asking price.
For instance, a bidding war can occur if more than one buyer is interested in a piece of real estate and they continue to offer increasing prices to become the owner of the property. A bidding war ends when a potential buyer makes a bid commitment that their opponents are unwilling or unable to match or outbid. Bidding wars favor sellers, as it removes pressure from the seller to make an asset appear attractive to potential buyers. In essence, the bidding war generally “increases” the value of an asset, and the seller generally makes a larger profit.
Investors and traders are confined by established buy and sell orders to purchase at the daily set ask price and sell at the daily set bid price.
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