What It Means
The bid-ask spread is the gap between the highest price a buyer is currently willing to pay (the bid) and the lowest price a seller is willing to accept (the ask) for an option. A narrow spread means the strike trades easily. A wide one means you'll likely pay more to get in, and get less to get out, than the LTP suggests.
Example
An ATM NIFTY option might show a bid of ₹136 and an ask of ₹140 — a ₹4 spread on a ₹138 option, tight enough that you'd fill close to the LTP either way. A deep OTM strike with almost no open interest might show a bid of ₹8 and an ask of ₹15, a ₹7 spread on a roughly ₹10 option. That's a large chunk of the premium itself, not a rounding error.
Warning
Checking only the LTP before placing an order can be misleading on a wide-spread strike. You may end up filling well above the LTP on entry, or well below it on exit, especially with a market order.
Related Terms
- Open Interest (OI) — high OI usually, though not always, means a tighter spread
- LTP (Last Traded Price) — the price the spread sits around
- Option Chain — where the bid and ask are quoted side by side