Does the Bid-Offer Spread Change Depending on Market Volatility?

Yes, the bid-offer spread typically widens during periods of high market volatility. Increased uncertainty about future price movements heightens the risk for market makers.

To compensate for this greater risk, they increase the difference between the price they are willing to buy (bid) and the price they are willing to sell (ask). This widening spread essentially increases the transaction cost for traders.

A narrower spread, conversely, signals a more liquid and stable market.