Options mechanics
Bid–Ask Spread
The difference between the highest displayed bid and lowest ask.
What Bid–Ask Spread Means
The spread is the gap between what the best displayed buyer offers and seller requests. It represents potential execution friction that can be material in options.
Bid–Ask Spread Formula
Bid–ask spread = ask − bid
How to Read the Result
An option at $2.10 bid and $2.40 ask has a $0.30 spread, or $30 per standard 100-share contract.
Limitations
- The midpoint is not guaranteed to fill.
- Quotes can move before execution.
- Large orders can face additional slippage.
Common Questions
Should I use a market order?
A market order prioritizes execution, not price. A limit order controls the worst accepted price but may not fill.