Best Practices

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Fair Pricing

Best Practices

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

This segment of Best Practices discusses what makes one market “fairly” priced compared to another.

When trading, we want to trade in markets that have high liquidity because liquidity makes markets "fairly" priced.

A liquid market has: high open interest across strikes, a tight bid-ask spread, and multiple expiration cycles. When markets are liquid, we generally have less price disagreement, fairer prices, and we can enter and leave trades more easily.

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