If you want to trade options successfully, you need to understand what the bid-ask spread really tells you — and what it doesn’t.
This is one of the first things I cover in my live training sessions, because if you don’t get this right, you’ll constantly be frustrated when your orders don’t fill the way you expect.
Let me walk you through exactly how I explain this to new traders. It’s a simple concept, but it makes a huge difference in how you manage your trades.
The Mid Price Is Not Real
A lot of traders look at the mid price or the mark on their platform and think that’s where they should get filled. But the mid is not a real price — it’s just a phantom number. It does not guarantee any transaction at all.
The only prices that guarantee a transaction are the bid and the ask. You can absolutely sell at the bid or buy at the ask. Anything in between is up for negotiation.
For example, I was showing a closing order on my butterfly spread. The natural to the mid was about 70 cents, with the full bid-ask spread at roughly $1.20. That means there’s another 60 cents between the mid and the ask. If you see a mid of $1.40, it does not mean someone is willing to trade with you there.
Think of it like this: If I told you eggs were priced anywhere between $5 and $30, you might say the middle is $17. But that doesn’t mean anyone is selling or buying eggs at $17. It just means that’s the midpoint — not an actual transaction price. The same logic applies to options.
Don’t Let Phantom Prices Fool You
When you see the mid flashing $1.40 one second and $1.30 the next, that doesn’t mean trades are happening there. The bid and the ask are what matter — that’s where trades are guaranteed.
So when managing your positions, always keep this in mind. If your order isn’t filling at the mid, it’s not because something is broken. It’s because there isn’t a willing buyer or seller at that price in that moment.
Understanding this concept will save you a lot of confusion and help you make better decisions when managing your trades. Never assume the mid is where you’ll get filled — know your spread and manage your orders accordingly.
Kane Shieh
Kane Shieh Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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