Wider Spreads or More Contracts? Nick Battista has the answer.

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Trade Logic Unlocked

Price Discovery in Illiquid Stocks

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.

With the competition for order flow today, and the high frequency efficiency that exists, the need for price discovery is not what it once was. Our orders will almost always be filled at the best available price. Still, there are times in lower liquidity stocks with wider markets where the midpoint between the bid price and the ask price might not accurately reflect the true value of the spread.

Today, we offer up two specific scenarios where this can happen and what to do about them.

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