Bid-Ask Spread
The bid-ask spread is the gap between the highest price a buyer will pay (bid) and the lowest a seller will accept (ask) for an option.
The spread is a real trading cost: you generally buy at the ask and sell at the bid, losing the difference on a round trip. It widens for illiquid strikes and in fast markets.
The midpoint is often used as a fair-value estimate when placing limit orders.
Example. An option quoted $1.20 bid / $1.40 ask has a $0.20 spread ($20 per contract); buying at $1.40 and immediately selling at $1.20 would cost that $20.
FAQ
Why are some option spreads so wide?
Low volume and open interest mean fewer competing quotes, so market makers widen the spread to compensate for risk.
How do I avoid paying the full spread?
Use limit orders near the midpoint rather than market orders, and trade liquid strikes with tight spreads.