Time value as option nears expiration Column 9 — Strike: Market makers would buy the options at the bid price and sell them at the ask price. In fact, you will find that you must always pay for any immediate advantage that any call or put option gives you. What this means is that, if you want to dabble in the equities markets , you need to become familiar with this concept. This is because more traders are embracing the benefits options offer. Trading and Investing involves high levels of risk.
The closest option strike price to that was $ For the Call options at the $ strike, the Bid was $ and the Ask was $ That was a dealer markup, or bid-ask spread of $ This is pretty modest. Even if we had to pay it all (by buying at the ask and then selling at the bid), that was not a huge difference.
Explanation of a Bid-Ask Spread
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Example: A hypothetical options chain shows the following prices for a particular option: Bid: $ Ask $ Last $ Any trader who wants to buy this option will have to pay the current ask price of $ per option. The bid price The bid price is the price at which the market is . Bid and Ask Price for Options f Let’s take a brief detour here to learn more about what the bid and ask represent since they can be confusing to new traders. Notice that the $ call shows a bid price of $ and an ask price of $ A $ bid/ask spread on an option that trades between $5-$7 is considered tight and a stock-option that trades over $10 and has a $ bid ask is considered to be tight. The bid/ask spread is important because it impacts the cost of trading options.