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Liquidity is King

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.

Liquidity is the measure of ease of entering and exiting a trade at fair and efficient prices.

An option chain with high liquidity will be categorized with the following:

  • Low bid-ask spread
  • High volume and open interest
  • Many expiration cycles

An option chain with low liquidity will be categorized as:

  • Wide bid-ask spread
  • Little to no volume and/or open interest
  • Few expiration cycles

Trading options with high liquidity is the number one most important factor to an options trader's success.

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