A book is a record of all the positions held by a trader. This record shows the total amount of long and short positions that the trader has undertaken. Traders maintain a book to facilitate trades for their customers and to profit from the spread between their bid and ask prices.

"Book" is also used to define the book value of a business or a list of customers.


For example, a trader with a very simple book may hold two positions: one long position of XYZ stock worth $1,500 and a short position worth $1,700. Keeping an up-to-date book allows a trader to be aware of his positions and the risk exposure related to those positions.

Many traders make a market in a particular stock or bond, which means that they facilitate transactions for customers. Traders use their firm's capital to maintain a book of long and short positions and provide a bid and ask price to investors. The bid represents the price that the trader pays for a security and the ask price is the sale price offered by the trader.

How a Spread Works

A trader attempts to profit on the difference between the bid and ask prices. In this case, the trader has long position of XYZ stock worth $1,500 (100 shares purchased at $15 per share) and a short position worth $1,700 (100 shares sold at $17 per share). The trader eventually must deliver the 100 shares sold in the short position to a buyer. Assume that the current bid is $16 and the ask price is $17.50, which means that the trader can profit on the spread between the bid and ask prices ($1.50 per share). Bid and ask prices change constantly, based on market conditions and customer orders.

Factoring in Book Value

The term "book" also refers to book value, which is an accounting term used to describe a key measurement of company value. Book value is related to the balance sheet formula of (assets – liabilities = equity). The term book value is another way of defining equity, and both terms refer to company assets minus liabilities owed by the firm.

Book value per common share of stock is a ratio that measures the amount of equity the company maintains per share of common stock. In theory, if the company sold all of its assets and paid off all of its liabilities, the amount remaining would be equity. If there is more equity available per common share, then each share is more valuable to a stockholder.

Examples of a Company Book

For many businesses, the order book represents customer orders that will be filled in future months. The dollar value of the order book is an indication of future sales and the growth prospects of the business.

"Book" can also refer to the customer list maintained by a particular salesperson or small business owner.

  1. Book Value Per Common Share

    Book value per common share is a measure used by owners of common ...
  2. Order Book

    An electronic list of buy and sell orders for a specific security ...
  3. Trading Book

    The portfolio of financial instruments held by a brokerage or ...
  4. Book Value

    1. The value at which an asset is carried on a balance sheet. ...
  5. Public Book (Of Orders)

    A book containing all of the buy and sell orders for a specific ...
  6. Buy The Book

    An order to purchase all shares available in the market for a ...
Related Articles
  1. Investing

    Market Value Versus Book Value

    Understanding the difference between book value and market value is a simple yet fundamentally critical component to analyze a company for investment.
  2. Investing

    Book Value: How Reliable Is It For Investors?

    In theory, a low P/B ratio means you have a cushion against poor performance. In practice, it is much less certain.
  3. Investing

    The Difference Between Book and Market Value

    Book value is the price paid for an asset. It never changes as long as the asset is owned. Market value is the current price at which the asset can sell.
  4. Investing

    Using The Price-To-Book Ratio To Evaluate Companies

    The P/B ratio can be an easy way to determine a company's value, but it isn't magic!
  5. Investing

    How Buybacks Warp The Price-To-Book Ratio

    Relying on price-to-book can get ugly if a company has repurchased stock. Learn why.
  6. Investing

    Negotiating the Bid

    A bid is an offer investors make to buy a security.
  7. Investing

    What Does Bid And Asked Mean?

    Bid and asked is a two-way price quotation.
  8. Investing

    Book Value Per Share for Banks: Is It a Good Measure? (WFC, BAC)

    Find out why bank stocks usually trade below book value per share, and understand how trading activities increase banks' risk exposures and affect valuation.
  9. Investing

    What's Recorded in a Cash Book?

    A cash book is an accounting book that records all cash receipts and cash payments before they’re recorded in a business’s general ledger.
  10. Investing

    How Bid Price Affects Liquidity

    The bid price is the amount a buyer will pay for a security.
  1. What is the difference between book value and market value

    Learn the differences between book value and market value, and see how investors use each type to determine if a company ... Read Answer >>
  2. What is the difference between a company's book value per share and its intrinsic ...

    Book value and intrinsic value are two ways to measure the value of a company.In simple terms, book value is based on the ... Read Answer >>
  3. What's the difference between book and market value?

    Book value is the price paid for a particular asset. This price never changes so long as you own the asset. On the other ... Read Answer >>
  4. What does it mean if a share's market value is significantly higher than its book ...

    Learn how investors and analysts compare the market value of stock shares to the book value per common share; discover what ... Read Answer >>
  5. What is the difference between book value and carrying value

    Dig deeper into the definitions of carrying value and book value, and learn to differentiate between their various financial ... Read Answer >>
  6. Who uses book value to estimate the value of a company?

    Understand the meaning of the term "book value" and how it is used by market analysts to estimate the worth or market value ... Read Answer >>
Trading Center