Understanding the Bid-Ask Spread in Options Trading
Dec 24, 2025The Bid-Ask Spread is a simple but powerful concept that affects every trade you make in the options market.
Here’s how it works:
- The Bid is the highest price a buyer is willing to pay.
- The Ask is the lowest price a seller is willing to accept.
- The difference between them is called the Spread.
When trading options, the spread matters a lot more than it does in stocks — because options are less liquid. A wide spread can eat into your profits instantly. For example, if the bid is $1.00 and the ask is $1.50, that means you’ll lose 50 cents per contract the moment you enter.
That’s why smart traders:
- Always check volume and open interest before trading
- Use limit orders, never market orders
- Try to enter at a price between the bid and ask
Even saving a few cents per trade can make a big difference over time — especially if you trade consistently.
If you’ve ever wondered why your trades don’t seem to work even when the stock moves your way, the answer might be… the spread.