Long calls & puts
How does the bid-ask spread percentage of low-volume option contracts destroy retail long scalability?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
Wide bid-ask spreads on illiquid contracts mean traders often buy near the ask and sell near the bid, creating an immediate paper loss on entry that can exceed the expected statistical edge of a long options strategy.
How it works
This transaction cost compounds with frequent trading or rolling, making strategies that look profitable on theoretical models far less effective once real execution costs are included.
An example
A contract quoted $1.00 bid / $1.30 ask forces a buyer to overcome a 30-cent round-trip cost before any profit begins, compared to a liquid contract with a 2-cent spread.
Risk & limitations
Cboe notes that displayed quotes can widen further during fast markets, so even limit orders may not fill at expected prices in thinly traded series.
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.