The Bid-Offer Spread, also known as the Bid-Ask Spread, relates to the quote of the price at which participants in a market are willing to buy or sell a stock or security. The bid price is the price at which a party is willing to purchase, while the ask (or offer) price is the price at which someone is willing to sell.
The Spread is measured in basis points versus the mid-point price. It is calculated as being (ask - bid) / (midpoint price) * 10000.
A basis point is a unit of measure used describe the percentage change in a value. One basis point is equivalent to 0.01% (1/100th of a percent), so 100 basis points is 1 percent.
The spread between the two prices arises as valuations differ. The spread will be larger for infrequently traded (aka. illiquid) stocks. From an investor's point of view, the spread is an extra cost, akin to the broker's commission.
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