Bid-Ask Spread

At any moment a market has two prices: the bid (best resting buy) and the ask (best resting sell). The spread is the difference, and the mid-price sits between them:

spread = ask − bid
mid    = (ask + bid) / 2

If BTC is $63,999.50 bid and $64,000.50 ask, the spread is $1.00. Relative to the $64,000 mid, that is about 0.156 basis points:

spread (bps) = spread / mid × 10,000
             = 1 / 64,000 × 10,000 ≈ 0.156

The CME glossary likewise defines the bid-ask spread as the difference between the best bid and best offer.

Why it's a cost

If quotes do not move, an immediate round trip with market orders buys at the ask and sells at the bid, losing one full spread before fees. In practice, quotes and available size can change between the two orders, so “one spread per round trip” is an explanatory example rather than a guaranteed realized cost.

Spread as a signal

The spread describes the top of the book, not all available liquidity. A tight quote can have little resting size behind it, while a wider quote can have substantial depth. CME's liquidity methodology therefore treats spread, book depth, and cost to trade as separate measures.

A common misconception is that the displayed spread is fixed. It can widen or narrow with venue activity, volatility, inventory, and time. One flat backtest input cannot reproduce that path unless the historical quote data itself drives the fill model.

On AlphaProve

AlphaProve exposes a spread assumption separately from maker and taker fees and slippage. That separation lets a researcher state the benchmark and avoid hiding all execution costs in one number. Raising the spread and rerunning is a sensitivity test, not a forecast. The four-level cost experiment gives a worked example of the combined effect.