Bid-Ask Spread
The gap between buy and sell prices — a hidden cost on every trade and a quick read on liquidity.
Definition
The bid-ask spread is the difference between the highest price buyers will pay (the bid) and the lowest price sellers will accept (the ask). You generally buy at the ask and sell at the bid, so the spread is a cost you pay to enter and exit.
What it signals
- Tight spread (bid ≈ ask) → high liquidity; easy to get filled near fair value.
- Wide spread → thin liquidity; you lose more crossing it, and fair value is harder to judge.
Why it matters
Spreads widen on far-OTM strikes, illiquid stocks, and in fast markets near the session close. A strike that looks attractive on premium alone can be expensive to trade if its spread is wide — the cost compounds across entry and exit. Prefer liquid, tight-spread strikes, and use limit orders rather than market orders.
Find liquid strikes
TradePulse's live option chain helps you spot the liquid, tight-spread strikes worth trading.