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Trade Logic Unlocked

Factors Impacting the Bid-Ask Spread

Trade Logic Unlocked

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

As active traders, we are always forced to negotiate the bid-ask spread. This is an unavoidable aspect of trading, and the difference between the bid price and ask price effectively represents a cost to us as traders. So what factors impact this spread?

Today, we see that there are essentially two: the amount of activity or information and the stock price itself. We are also reminded, however, that given the technological advances of trading in today’s environment, the risk that we are “picked off” and filled at an undesirable price is nearly zero.

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