The offer price and bid price are key terms in trading, representing two sides of a market transaction. The offer price, also known as the ask price, is the price at which a seller is willing to sell an asset, such as a currency, stock, or commodity. On the other hand, the bid price is the price at which a buyer is willing to purchase that asset.

The difference between the two is primarily based on market participants’ intentions: sellers set the offer price, and buyers set the bid price. Typically, the offer price is higher than the bid price, reflecting the gap between what sellers want to receive and what buyers are prepared to pay. This gap is known as the "spread."

In practical terms, if you are buying an asset, you will pay the offer price, whereas if you are selling, you will receive the bid price. The spread between the bid and offer prices is crucial, as it represents the transaction cost or profit margin for market makers or brokers facilitating the trade. Narrower spreads indicate a more liquid market, while wider spreads suggest less liquidity or higher volatility. Understanding the relationship between bid and offer prices is essential for effective trading and cost management.