The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to help you guys understand the bid ask spread, talk a little bit about what the bid ask spread is and how it’s applicable to the markets. The bid ask spread is essentially just the difference between the highest price that a buyer is willing to pay for an option contract and the lowest price that a seller is willing to accept. The way that I think about it is I think about the analogy of real estate. When a property comes on the market and is going to be sold in a real estate transaction, there’s the price that the seller is asking and then there’s the price that a buyer could potentially place a bid for it. And so, that difference is the spread, the difference between what someone’s asking and what someone is willing to pay for that contract or is trying to pay for that contract. Now, ultimately, in many cases and especially in the options market, what ends up happening is that the buyers and selle