Every option has two prices: the bid (what buyers will pay) and the ask (what sellers want). You buy at the ask and sell at the bid, so the gap between them is a cost you pay just to get in and out. Move the sliders on an illustrative TSLA $420 option and watch how a wider spread quietly taxes the round trip.
Bid, mid, and ask
What the spread costs you
Bid (you sell here)
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Ask (you buy here)
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You pay to buy
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You receive if you sold now
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Instant round-trip cost
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Cost as % of position
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Plain EnglishYou buy at the ask and sell at the bid, so the gap between them is a cost you pay just to get in and out; on a wide or thinly traded option that gap can quietly eat a real chunk of the trade.
Three things to know about the bid-ask spread:
You are always on the wrong side of the gap. You buy at the higher ask and sell at the lower bid, so the moment you enter you are already down the full spread- before the stock has moved at all.
It repeats on every trade. This cost is paid each time you get in and out, and it is worse on wide, illiquid options where the bid and ask sit far apart.
A limit order near the mid helps. Instead of taking the ask, you can offer a price closer to the middle and often get filled for less, shrinking the toll you pay.
Taxes are not shown here. Options and the underlying stock are taxed differently, and it depends on your holding period and account type. None of this is tax advice.