Bid-Ask Spread

Q: What is a good bid-ask spread for Nifty options?

Near-the-money Nifty strikes in the current expiry usually show a spread of ₹0.05 to ₹0.50, a fraction of a percent of the premium. Spreads of several rupees appear on far strikes, next-month contracts and illiquid stocks. The useful measure is the spread as a percentage of the mid price: under 1% is cheap to trade, over 5% is expensive.

Q: Why is the spread wider on some strikes?

Market makers quote tighter where volume is high and risk is easy to hedge: at-the-money strikes in the nearest expiry. Far out-of-the-money strikes, deep in-the-money strikes, later expiries and stock options with low open interest have fewer quotes and wider spreads. Spreads also widen during fast markets and around the open.

Q: Does a market order pay the spread?

Yes, and sometimes more. A market buy fills at the best ask and a market sell at the best bid, so a round trip pays the full spread. On a thin strike a market order can walk through several price levels. A limit order placed at or near the mid lets you choose the price and often fills at a better level.

Q: Is the last traded price the same as the current price?

No. The last traded price is the most recent fill, which on an illiquid strike may be hours old. The current price is the bid-ask pair, and the mid of the two is the fairest single estimate. Implied volatility on a chain is normally computed from the mid for this reason.

The cost nobody puts on the contract note. It is paid on the way in and the way out, and on the wrong strike it is larger than the brokerage and taxes combined.

In short: the bid-ask spread is the difference between the highest price a buyer is currently willing to pay (the bid) and the lowest price a seller is willing to accept (the ask). It is the cost of trading immediately: a market buy fills at the ask, a market sell at the bid, so a round trip loses the spread. On NSE it is tiny on near-the-money Nifty strikes in the current expiry and large on far strikes, later expiries and thin stock options.

The intuition

Every option chain has two prices for each strike, not one. The bid is what you get if you sell now; the ask is what you pay if you buy now. The gap between them is the market maker's compensation for standing ready on both sides and for the risk of being picked off by someone who knows more. Where many traders compete to quote, the gap is a few paise. Where few do, it can be a large slice of the premium.

For a trader the spread is a friction that is paid twice per position, once to enter and once to exit, and it is paid whether the trade wins or loses. It does not show up as a line item anywhere, which is why it is the most under-counted cost in options trading.

Formula

Spread = ask − bid

Spread as a percentage = (ask − bid) ÷ mid, where mid = (ask + bid) ÷ 2

Round-trip cost per lot ≈ spread × lot size (if both legs are done at market)

Worked example (illustrative numbers)

Suppose NIFTY is at 24,000 and the chain for the Tuesday expiry shows:

Strike	Bid	Ask	Spread	Spread % of mid	Round trip per lot (65)
24,000 call (ATM)	149.80	150.05	₹0.25	0.17%	₹16
24,500 call (OTM)	17.50	18.50	₹1.00	5.6%	₹65
25,500 call (far OTM)	1.00	1.60	₹0.60	46%	₹39
24,000 call, next month	455	462	₹7.00	1.5%	₹455

The at-the-money weekly costs ₹16 per lot to trade in and out at market, which is less than the brokerage. The far strike at ₹1.30 mid costs 46% of its own value in spread: a trader who buys at 1.60 needs the premium to rise above that just to break even on the spread alone. The next-month strike has a small percentage spread but a large rupee one, because the premium is large; on ten lots that is ₹4,550 of friction. A limit order at the mid would recover roughly half of each figure on average.

The order book behind one chain row. Quantities are in units; divide by 65 for Nifty lots.

Why it matters to an options trader

It is a real cost on every trade. On far strikes and multi-leg positions it routinely exceeds brokerage, exchange charges and STT together.
It measures liquidity. A wide spread means few quotes and a hard exit. Before placing a four-leg iron condor, the spread on each leg tells you whether you can get out in a hurry.
It corrupts the numbers on the chain. Implied volatility and the Greeks computed from a stale last-traded price on a wide-spread strike are close to meaningless; the mid is the honest price.
It is why expiry-day scalping on far strikes rarely works. The spread on a ₹1 option is often most of the option.

Common mistakes

Using market orders on options. Limit orders at or just inside the mid are standard practice for a reason.
Judging a strike by its last traded price. Look at the bid and ask; the last trade may be old.
Ignoring spread on multi-leg entries. Four legs at market can cost four spreads; a single basket order with limits is cheaper.
Trading next-month or far strikes for a quick move. The spread can be larger than the expected gain.
Trading in the first minutes after the open. Spreads are widest before market makers have settled their quotes.

Indian-market specifics

Nifty's weekly Tuesday options are among the most liquid contracts in the world; near-the-money spreads are often the minimum tick of ₹0.05. Bank Nifty and FinNifty, being monthly only, concentrate liquidity in the current month.
Option prices on NSE tick in ₹0.05, so the smallest possible spread is ₹0.05; on a ₹1 option that is already 5%.
Stock options vary enormously: the largest F&O stocks quote tight spreads near the money, while many smaller names have spreads of several rupees and little depth.
Lot sizes after the January 2026 revision (Nifty 65, Bank Nifty 30, FinNifty 60, Sensex 20) convert a per-unit spread into the rupee cost per lot.

FAQ

What is a good bid-ask spread for Nifty options?

A few paise to half a rupee near the money in the current expiry; judge any strike by spread as a percentage of mid.

Why is the spread wider on some strikes?

Fewer market makers quote far strikes, later expiries and thin stocks, and all spreads widen in fast markets.

Does a market order pay the spread?

Yes, and on a thin strike it can pay more by walking through the book.

Is the last traded price the same as the current price?

No. The bid and ask are current; the mid is the fair single estimate.

Check liquidity before choosing a strike

The option-chain pages show open interest and volume per strike from the latest close, the first signal of where spreads will be tight. In the app, the live chain shows the current bid and ask for every strike.

Nifty option chain Highest-OI screener

Related terms

Open Interest, the other liquidity signal
Premium
Implied Volatility (IV), computed from the mid, not the last trade
Lot Size