Hey all

I am a newbie and have some question that I would like to have answered....

Sorry very young and not very experienced but would like to learn!

Question 1

OK so in finance basis points are used as a measurement of change, commission etc...

Basis point = 1/100 = .01

.01 is 1 basis point..

Therefore 10 bps on a $10k transactions would be..

.10*10000=1000

Meaning a 10bps commision of a 10k trade would be $1000, Correct?

Question 2

Below is the Bid and Ask of the security ABC for example

BID 150 165 ASK

The spread would be 15 cents,

How do I calculation this as a pecentage?


Any help here would be great or directions to some good website would be great!

For your first question; yes your calculations are correct. A basis point is 0.01%, and is used to solve ambiguities with someone talking about a 10% increase (which could mean anything from 9.5% to 10.49%)

On the second question, it depends what you're trying to find out. If you're trying to find out what the percentage of the asking price the bidding price is, just do:
p1 = BID/ASK * 100
If you're trying to find out how much more the asking price is do:
p2 = (ASK/BID * 100) - 100

Hope that helps