How To Get A Better Buying & Selling Price Of An Option By Narrowing The Bid-Ask Spread

The bid and ask spread is the spread which market makers earn while buying and selling options.

For example, a bid and ask spread may exist on as $1.20 and $1.60 respectively.

Bid Ask
$1.20 $1.60

So a market maker in this particular traded option will buy the option at $1.20 and sell it at $1.60. This is a $0.40 spread. An option buyer can place an order to buy the option at $1.50 instead of the quoted $1.60. It is then up to the market maker to accept the order and fill it. In many instances, the order is accepted after a time lag.

An option seller who wants to sell a better price than $1.20 may place an order that is higher than $1.20. For example, the option seller may place an order at $1.30. In many instances, the order may be accepted and filled.

Hence, an options trader is able to place orders at prices other than the quoted bid and ask spreads to get better buying and selling prices.

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