How to calculate bid-ask spread is more than 20% of options price (Eg. $0.14 per share)
1. Manual Calculation Framework:
Bid-Ask Spread % = [(Ask - Bid) / Mid-Price] × 100
Example: If Bid = $0.08, Ask = $0.11 → Mid = $0.095 → Spread = 31.6% ($0.03 / $0.095).
Your entry price ($0.14) vs. current mid-price determines your unrealized P&L.
2. Actionable Advice
Check Liquidity: Low open interest (e.g., < 50 contracts) implies high slippage risk.
Roll Options: If spread >20%, consider rolling to a higher-liquidity strike/expiry.
Limit Orders: Place orders near mid-price to avoid unfavorable fills.
Critical Note:
Options with wide spreads (>20%) often reflect low trader confidence or impending volatility. Verify the stock price trend and news catalysts before adjusting positions.
Disclaimer: This analysis assumes hypothetical bid-ask values due to data limitations. Confirm actual quotes via your brokerage platform.
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