Price Tension

Is it tense, or is it… awkward? Price tension is when a seller and a buyer are not on the same page.

"Okay...you can have this plumbus for $40," the seller might say. The buyer says, "Uhhh, I could get a plumbus X for $45. I’ll take your older version for no more than $30." The bid-ask spread, or price tension, for the pre-X plumbus is $10 on the plumbus market.

In markets of mismatched buyers and sellers, fewer transactions happen. Business is slow, which mean liquidity is low. For illiquid assets, like old plumbuses (yes, used), limit orders are often used, which is where you set the max price at which you’ll buy it if it ever lowers to that amount (or vice versa if you’re selling). Waiting for that price tension to ease up...can take a while.