Bid-Ask Spread | Options Trading For Beginners
The bid-ask spread is a very important liquidity metric that all stock and options traders should pay attention to before entering a trade.
The bidding price represents the highest price someone is willing to pay for a stock or option, while the asking price is the lowest price someone is willing to receive for a stock or option.
The bid-ask spread represents the “hidden” cost of entering and exiting a stock or option position. In this video, you’ll learn the minimum bid-ask spread values you should be looking for, how the bid-ask spread changes with an option’s “moneyness,” how the bid-ask spread changes with the number of days until an option expires, and how market volatility contributes to wider bid-ask spreads.
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