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Bid-Ask Spread
is the difference between the highest price buyers will pay (bid) and the lowest price sellers accept (ask). It's essentially the cost of immediacy.
Wide spreads mean higher trading costs. Market makers profit from the spread. Liquid options have tight spreads.
Quick answer
Bid = what buyers pay. Ask = what sellers want. Spread = Ask - Bid = your cost. Wide spread = expensive to trade. Always check spread before trading. Use limit orders, not market orders. Liquid options (SPY, AAPL) have tight spreads.
The bid-ask spread is the gap between the best buy and sell prices — an effective transaction cost that widens sharply on illiquid strikes.
What Is the Bid-Ask Spread?
Bid: The highest price someone is willing to pay for an option right now.
Ask: The lowest price someone is willing to sell an option for right now.
Spread: The difference between ask and bid.
Example: Bid $2.50, Ask $2.70. Spread = $0.20 (or 20 cents).
ApexVol Terminal
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Chains, IV rank, expected move and dealer positioning for 5,500+ US stocks and ETFs.
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Why It Matters
If you buy at $2.70 and immediately sell, you get $2.50. You've lost $0.20 per share ($20 per contract) instantly.
For a round trip (buy then sell), you pay the spread TWICE. That's $40 per contract in the example above.
Impact on Returns
On a $2.00 option with $0.20 spread, you need a 10% move just to break even on the spread!
What Causes Wide Spreads?
- Low volume/liquidity
- High volatility/uncertainty
- Far OTM or deep ITM options
- Distant expirations
- Small underlying stocks
How to Minimize Impact
- Trade liquid options (high volume/OI), such as the most liquid ETF options
- Use limit orders, not market orders
- Trade during market hours (not pre/post)
- Stick to popular underlyings (SPY, QQQ, AAPL)
- Trade ATM options (tightest spreads)
Key Takeaways
- Spread = hidden cost of every trade
- Wide spreads destroy profits
- Always use limit orders
- Liquid options = tight spreads
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Options Profit Calculator- Written by
- ApexVol Research Team
Quantitative options research. All calculations use live institutional-grade data — the same source professional volatility desks use. - Reviewed by
- Ryan Silk, ApexVol Founder
Reviewed for technical accuracy. 10+ years trading options; built ApexVol's pricing engine, Greeks model and IV-rank methodology.
Revised as market conditions and institutional data change. Last revised 2025-01-21. How we research →
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