The spread between the bid price and the ask price is a transaction cost to the option trader.

Question

Quizplus · Accepted Answer

The bid-ask spread is the difference between the highest price a buyer is willing to pay for an option (bid) and the lowest price a seller is willing to accept (ask). This spread represents a cost to the option trader, as they will have to buy at the higher price or sell at the lower price, resulting in a lower profit or a higher loss.

The Spread Between the Bid Price and the Ask Price