Bid-Ask Spread

The bid/ask spread is the difference between the market displayed bid and ask price in a security.

In general, the spread is considered the edge a liquidity provider earns for providing liquidity and the Fee a liquidity taker pays for an immediate execution. So, the wider the spread the higher the cost to get an immediate execution to buy or sell. The midpoint of the spread is generally considered the "fair value" of an option and the mark to the market price. So the further away from midpoint the higher the cost to get an immediate execution relative to fair value.

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