August 30, 2026
Commission-free trading made the visible cost of an options trade zero and left the larger one in plain sight, quoted on every screen and mentally filed as background.
The bid is what someone will pay you. The ask is what someone will sell to you for. Selling an option gets you the bid; buying it back costs the ask.
A contract quoted $1.05 bid, $1.35 ask. You sell at $1.05, collecting $105. Later you close by buying at $1.35, paying $135.
If nothing whatsoever changed in between, you're down $30 — 29% of the credit, spent on the spread alone.
Compare a liquid chain quoting $1.18 / $1.22. Same nominal premium, $4 round-trip cost. The premium column looks nearly identical and the trade is a fundamentally different one.
The natural response is to work the order at the midpoint. That's correct practice and it isn't free.
On a genuinely liquid contract, mid or near-mid fills routinely. On a wide market, the mid is a number halfway between two quotes that nobody is obliged to trade at, and an order sitting there may not fill at all, or may fill only after the underlying has moved against you, which is a cost that doesn't show up as a cost.
The practical habit is to always work limit orders and never send a market order on an option. A market order into a wide chain gets the ask, and on an illiquid strike the ask can be startling.
Three things, in order of usefulness.
Underlying liquidity dominates all three. Options on large, heavily traded names and major ETFs are tight almost everywhere on the chain. Options on a small company are wide almost everywhere, and no amount of patient order-working fixes a market that has two participants.
Quoted spreads are not a fixed property. Market makers widen them when uncertainty rises, when the underlying gaps, and around events.
Which produces the pattern that matters: the position you most want to close — a short put on a stock that just dropped 9% — is quoted in a market that has widened, on a strike that was thinly traded to begin with. The exit you assumed was available at a modest cost is available at a considerably larger one.
This is the practical reason liquidity belongs in the entry decision rather than being noticed at the exit. A wide chain is a fine place to hold something to expiration and a poor place to need to manage a position.
A spread has two legs and therefore two spreads. Submitted as a single combination order, the market makes a price on the package rather than on each leg, which is usually better than the sum of the two individual spreads. Submitted as two separate orders, you pay both, plus the risk of getting filled on one leg and not the other.
Always as one order. And note that a four-leg position closed leg by leg can hand back a surprising fraction of the original credit for no reason other than order construction.
Thirty dollars on one trade is nothing. The point is that it isn't one trade. A strategy that opens and closes two positions a month for a year pays the round trip twenty-four times, and on a wide chain that's several hundred dollars against a strategy that might collect two thousand.
Nothing else in options offers that large an improvement for a decision as simple as trading a different underlying.