Options Bid-Ask Spread
Options bid-ask spread explained. Learn how spread width affects fills, slippage, and execution quality, plus ways to reduce trading costs.
Frequently asked questions
What's a good bid-ask spread for options?
Aim for spreads under 5% of the option's value. Highly liquid options like SPY might have 1-2% spreads. Less liquid options can have 10%+ spreads, making them expensive to trade.
Should I use market orders or limit orders?
Almost always use limit orders for options. Market orders guarantee execution but often fill at unfavorable prices, especially in wide-spread options. Start with a limit at the mid-price and adjust if needed.
Why are some spreads so wide?
Low liquidity is the main cause. Market makers widen spreads when there's little activity to protect against being stuck in positions. Deep OTM options, low-volume stocks, and far-dated expirations often have wide spreads.