Long calls & puts
How does Slippage on illiquid option chains degrade the mathematical expectancy of long buying strategies?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
Slippage occurs when a trade executes at a worse price than expected due to wide bid-ask spreads on illiquid option chains, directly reducing the net mathematical expectancy of long option buying strategies.
How it works
Thinly traded strikes often have wide spreads and low open interest, so market orders can fill well away from the midpoint, compounding losses especially for frequent or short-term option buyers.
An example
Buying an illiquid option with a $0.50 bid-ask spread versus the theoretical midpoint can immediately put the position several percent underwater purely from the entry cost of crossing that spread.
Risk & limitations
Minimizing slippage requires using limit orders near the midpoint and favoring higher open interest, actively traded contracts rather than thinly quoted far-dated or deep OTM strikes.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.