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What is an option bid-ask spread?
Learn what the bid and ask represent, why their difference matters, and how it can affect an execution
Prepared by Mark · Primary sources below
Direct answer
An option's bid is the highest displayed price a buyer is willing to pay, and its ask is the lowest displayed price a seller is willing to accept. The difference is the bid-ask spread. A quoted midpoint is not a promise of an execution, and a wide spread can make the price received or paid differ materially from an estimate
Quotes show two sides of a market
Option chains display the best bid and offer available from market participants. Bid size and ask size show the aggregate contracts displayed at those respective prices, but they can change before an order is filled
A wider spread adds price uncertainty
A wide spread can increase the gap between a model value, an expected price, and the actual execution. News, perceived trading risk, the underlying's own spread, and competition among market participants can all affect the width
Order instructions involve a tradeoff
A market order may prioritize execution but can receive a price different from an observed quote. A limit order specifies a price boundary, but it might not execute. The appropriate handling depends on the order and account, so the guide does not treat either outcome as guaranteed
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