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Limit or market order when you sell an option?

Use a limit order every time you sell or buy back an option. A market order fills at whatever the other side is offering, which on options is often far from fair. Start at the mid price and work toward the bid in small steps.

Options guide · 8-minute read · Updated 2026-10-26

The short answer

A market order says, "fill me now, at any price." A limit order says, "fill me at this price or better, or not at all."

On stocks with millions of shares trading, the gap between those two is often a penny. On options, it can be ten, twenty or fifty cents a share. Since one contract is 100 shares, that's real money, paid twice: once to open and once to close.

So the rule is simple. Sell options with a limit order, priced near the Mid price. Never use a market order to open or close an option.

The bid, the ask and the mid

Every option on the Options chain shows two prices.

A market order to sell fills at the bid, or lower if the bid vanishes. A market order to buy fills at the ask, or higher. You pay the whole spread both ways.

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

You want to sell a 30-day put on a made-up stock, XYZ. The quote is bid $0.90 / ask $1.30. The mid is $1.10.

• Market order: fills at $0.90. You collect $90.
• Limit at the mid: fills at $1.10, or close to it. You collect $110.

That's $20 gone on the way in. Now the way out. Three ways the trade can end, if you close it with the same kind of order you opened with:

On the winning trade, market orders cut the gain by more than half. On the losing trade, they made the loss $70 bigger. Same stock, same option, same days. The only difference was the order type.

That cost is often called the "spread tax." See how the bid-ask spread taxes option sellers for the full math.

How to work a limit order

You don't always get the mid. Here's a calm way to get close:

1. Start at the mid. Enter a limit to sell at $1.10.
2. Wait a minute or two. If it fills, you're done.
3. Step toward the bid by a nickel. Try $1.05. Wait again.
4. Stop at your floor. Decide in advance the lowest you'll take. If the market won't meet it, skip the trade.

The same steps work in reverse when you buy back: start at the mid and step up toward the ask.

You can also leave a buy-back order sitting for days. A GTC order ("good till cancelled") to buy the option back at, say, half of what you sold it for will fill on its own if the price gets there.

When the spread is too wide to trade

Sometimes no order type fixes the problem. If the spread is huge compared with the option's price, even the mid isn't reliable. The option is thinly traded, and fills will be poor going in and coming out.

Signs to skip a strike or a stock:

• The spread is more than about a tenth of the mid.
• Open interest at the strike is tiny, in the single or low double digits.
• No volume traded today at that strike.
• The quote jumps around every few seconds.

A nearby strike with more open interest is often much tighter. Or pick a stock with busier options. Our page on checking option liquidity has a quick checklist, and I didn't check the bid-ask spread shows what it costs when you skip it.

Timing makes a difference too. Spreads are often wider in the first few minutes after the market opens and in the last few minutes before it closes. Quotes settle as trading picks up.

If you can, place option orders after the open has calmed down. There's rarely a reason to sell a put in the first five minutes of the day.

Wide spreads also show up around big news, earnings and fast markets. That's exactly when a market order can fill at a price you'd never have chosen.

Where this fits in the wheel

The wheel strategy is a long series of small trades: put after put, call after call. Each one has an entry and often an exit. A spread tax on every one quietly eats a large part of what you collect.

Limit orders cost you nothing but a little patience. They are the easiest edge in options selling, and the one most people skip.

In Canada and the US, brokers that offer options generally offer limit orders on them too. Order screens differ by broker, so check where the limit price box sits before your first trade.

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