Home › Comparisons

Bid-ask spread vs commission: which one costs you more?

A commission is a fee your broker shows you. The bid-ask spread is the gap between what buyers pay and sellers ask, and you pay part of it on every fill without seeing a line item. On most option trades, the hidden one costs more.

Comparison · 6-minute read · Updated 2026-10-26

The short answer

A commission is a fixed fee per contract that your broker charges, plus small regulatory fees. Some brokers charge none. It's printed on your trade confirmation.

The bid-ask spread is the gap between the highest price a buyer will pay (the bid) and the lowest price a seller will take (the ask). When you sell at the bid and later buy back at the ask, you pay that gap. It never shows up as a fee. It just shows up as a worse price.

On a busy option, the spread can be a few cents. On a thin one, it can be dimes or more. Each cent is $1 per contract, because every contract covers 100 shares.

Side by side

A worked example (an illustration, not a trade idea)

You sell one 30-day $45 put on a made-up stock, XYZ. Then you buy it back two weeks later. Say your broker charges $0.65 per contract each way. That's an example rate; check your own.

Two strikes look alike, except for the gap:

• Busy strike: bid $0.98, ask $1.02. Middle $1.00.
• Thin strike: bid $0.85, ask $1.15. Middle $1.00.

Two weeks later, the middle price has fallen to $0.40 on both. The busy strike shows $0.39 / $0.41. The thin one shows $0.25 / $0.55.

If you trade at market prices, you sell at the bid and buy at the ask.

Look at the thin strike. The commission was $1.30. The spread cost $30, more than twenty times as much. Half of the profit went to the gap, and the commission barely mattered.

The last row shows it again. When a trade goes wrong on a thin strike, you lose on the stock and you also pay the wide gap to get out.

Why the spread is easy to miss

Your broker's app shows a commission line. It doesn't show "spread paid." The cost hides inside the fill.

Worse, it hits you twice. You give up part of the gap when you sell, and again when you buy back. If you roll, you cross two spreads at once: one on the leg you close and one on the leg you open.

Commission-free brokers make this even easier to miss. The fee you can see is zero, so it feels free. The spread is still there.

How to shrink the spread you pay

1. Use limit orders. Start at the middle price. If it doesn't fill, move a cent or two toward the bid. Never use a market order on an option. See Mid price.
2. Trade busier strikes. Strikes with high Open interest and volume tend to have tight gaps. See volume vs open interest.
3. Trade busier stocks. Big, widely traded stocks and ETFs usually have tighter option spreads than small ones.
4. Avoid the first and last minutes. Gaps are often wider right after the open and in fast markets.
5. Close fewer times. Every buyback and every roll crosses the spread again. Plan exits instead of trading out of nerves. See closing early vs rolling.

When the commission does matter

Commissions matter more when:

• the premium is tiny, like $0.10, so a fixed fee is a big slice,
• you trade many contracts often,
• you buy back cheap options at $0.05 to end the risk.

Even then, compare them with the spread. A broker with no commission and poor fills can cost more than one with a fee and good fills. Our guide to how options are priced explains what sets the middle price in the first place.

For the wheel strategy, the rule is simple: check the gap before you check the premium. A big premium with a wide gap may pay less than a small premium with a tight one.

Questions