OptionAutomator Options Trading Glossary:

Definition, Examples & Resources:Bid-Ask Spread'

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What is Bid-Ask Spread in Options Trading ?

Bid-Ask Spread
The Bid-Ask Spread is the difference between the highest price the market is willing to purchase the stock or option and the lowest price the market is willing to sell the stock or option. The Bid-Ask Spread is a very important measure of liquidity.  The less the difference between the bid and ask prices, the "tighter" the market.  When a stock or option has a very tight market, this is a very strong indicator of good liquidity. OptionAutomator's Brutus Options Ranker is set up to evaluate bid/ask spread in your options trading strategy.  A good options trader will always attempt to minimize (i.e., seek the tightest markets) in their options trading strategy.  This will ensure the trader enters a trade with minimal slippage  (getting the best possible prices on each side of the trade) as well as ensure that the trader can execute the opposite order to close the trade when they need to close or adjust the position.  

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