It's the difference between the bid/ask price offered. Liquid contracts or contracts with a higher trading volume usually have a tighter bid/ask spread, and contracts that have a lower trading volume usually have more room between the bid/ask price.
The ask price is the most competitive price of stock or an option at which a seller is willing to sell. Conversely, this is the price that the stock or option may be purchased at when a market order is used. [click to read more]
The bid price is the most competitive price for a stock or an option at which a buyer is willing to purchase the asset. Conversely, this is the price that the stock or option may be sold at when a market order is used. [click to read more]
The real time quotes without any delay and details the specific bid-ask spread provided by each market maker. These quotes are typically only available to elite big investors and traders willing to pay for the data stream subscriptions.[click to read more]
An order that is placed in the market to be executed at a set price. If the set price is not reached in the market, this type of order never gets filled. It is wise for traders to use limit orders when the option contract has a wide bid-ask spread and/or low liquidity.[click to read more]
The characteristic of high volume of trades in an option so as to be able to easily square of any held position in that option at reasonable market price. Volume and the width of the bid-ask spread are good idications of overall contract liquidity. [click to read more]
A type of order which finds nearest best price in the market and fills the order immediately at best available price. These types of orders should not be placed on security with wide bid-ask spreads.[click to read more]
The difference between the bid price and ask price which indicates how close the buyers and sellers are to an average price. Liquid stocks and options have small (tight) bid/ask spreads, which ensures good pricing and a future market to close the position.