 |
Definition of 'Reduced Spread'
A reduction in the spread between the buy/bid and sell/ask price for a security, currency, or loan. In most cases, a reduction in the spread signifies that a financial institution will experience a decline in its profit margin that it earns on its spread.
|
 |
Investopedia explains 'Reduced Spread'
A reduced spread in loan rates translates to a reduction between the cost of funds for the lender and the rate at which these funds are lent out. Lending institutions can reduce their spread in response to factors such as, more competition from other creditors, less perceived risk in the lending market due to favorable economic conditions, or increased liquidity in the secondary market for these loans.
A reduced spread in currency markets will lower the difference between what a currency purchase is at and what the same currency is sold at. This could be due to an increase in expected volume. Bid-ask spreads contribute to the inefficiencies of matching currency buyers with sellers.
A reduced spread in the equity markets is a reduction in the gap between what a market maker is willing to buy or sell a stock at, if there is no other counter party for an order. This is done to ensure liquidity in the trading market, and to allow some additional profit to be generated. Spread goals of registered traders vary by company, depending on trading activity, issuer size and public float.
|
Search results for 'Reduced Spread'
-
http://www.investopedia.com/university/optionspreadstrategies/optionspreads2.asp
... As you can see, the risks of being wrong are reduced with a spread, but
this is balanced with reduced reward if you are correct. ...
-
http://stocks.investopedia.com/stock-analysis/2011/Should-Darden-Stand-Pat-Or-Spread-Out-DRI-MCD-YUM-DIN-EAT-CAKE-RUTH0928.aspx
... Should Darden Stand Pat Or Spread Out ... Now it's fair to assume that Darden will see
positive leverage from reduced capital expenditures (the existing store base ...
-
http://www.investopedia.com/articles/trading/08/flock-to-iron-condors.asp
... only lose money on either the call spread or the put spread; they cannot ... The probability
of losing can be reduced, but reward potential is also reduced (choose ...
-
http://www.investopedia.com/articles/optioninvestor/09/bear-vertical-put-spread.asp
... (For further reading, see Option Spread Strategies.) Advantage No.1: The trader
has reduced the cost of the trade by 44% (from $250 to $140). ...
-
http://www.investopedia.com/articles/optioninvestor/09/equity-option-debit-spreads-protect-loss.asp
... In this case we greatly reduced the effects of theta by reducing the amount of
extrinsic value, which again ... Let's look at an example using a bear put spread. ...
-
http://www.investopedia.com/articles/optioninvestor/08/iron-condors-risk-reward.asp
... the spread is narrow, the premium collected, the profit potential and the maximum
loss (the spread × 100, minus the cash premium collected) are all reduced. ...
-
http://www.investopedia.com/university/optionspreadstrategies/optionspreads3.asp
... The cost of this reduced risk comes in the form of limited upside profit ... upside profit
potential, the maximum profit potential is capped at $380 per spread. ...
-
http://www.investopedia.com/articles/optioninvestor/09/portfolio-margin.asp
... Assuming 10 contracts of a one month 250/240 credit spread (100 points farther ... Although
the trader has significantly reduced the risk of loss, the maintenance ...
-
http://www.investopedia.com/articles/optioninvestor/09/equivalent-positions.asp
... Reduced Commissions. The naked put is a single trade ... Exiting the Trade Prior to
Expiration Sometimes the spread turns into a quick winner when the stock rallies ...
-
http://www.investopedia.com/articles/optioninvestor/10/covered-call-no-stock.asp
... to as a calendar spread. If done properly, the potential advantages of this position
relative to a typical covered call position are: Greatly reduced cost to ...
|
|
