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Market Structure
The Bid-Ask Spread, Explained
It is the quietest cost in trading, and it is on every trade you place. Here is what the bid-ask spread really is.
NoVo Options Trading · 2026
The bid is the highest price a buyer will currently pay; the ask (or offer) is the lowest price a seller will accept. The gap between them is the spread - and crossing it is a real cost you pay every time you enter or exit a position.
Why the spread exists
Market makers quote both sides and earn the spread as compensation for providing liquidity and taking on risk. Buy at the ask and immediately sell at the bid, and you are down the spread before the market moves at all. On a tight, liquid product that is pennies; on a thin one, it is a real tax.
What widens it
Spreads widen with low liquidity, high volatility, and uncertainty. A calm midday SPY spread is razor-thin; the same spread during a news spike or in extended hours can blow out. Far-out-of-the-money and low-volume options carry the widest spreads of all - which is exactly where beginners get quietly fleeced.
You do not need the market to move to lose money. Cross a wide spread and you have already paid.
Why it decides where you trade
Tight spreads are a huge part of why serious short-term traders concentrate on liquid instruments like SPY. Deep, tight markets mean minimal slippage and clean fills. Using limit orders lets you control the price you pay relative to the spread - a small discipline that compounds across hundreds of trades.
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NoVo is a software tool for market analysis and for executing trades you initiate, not financial advice. This article is general education, not investment advice. Options trading involves substantial risk of loss, up to and including your entire capital. NoVo makes no guarantee of profit, win rate, or performance, and past results do not predict future outcomes. You are responsible for your own broker account, configuration, and trading decisions.