Bid-ask spread cost calculator: what the spread takes from every trade
The gap between the bid and the ask is a cost you pay without seeing it. Enter the quote, your contracts and how often you trade — see what it takes per contract, per year, and as a share of the premium.
How it works: the spread = ask − bid, per share, × 100 per contract. The mid is halfway between. Selling at the bid instead of the mid gives up half the spread; a round trip at market (sell at the bid, later buy back at the ask) gives up the whole spread. Spread as a share of premium = spread ÷ mid. The per-year number multiplies the full spread by your contracts and your trades per year. Fees left out.
The cost nobody sees on the statement
The default numbers are a hypothetical option quoted 1.40 bid, 1.60 ask (an illustration, not a trade idea). The spread is 0.20 a share — $20 a contract, about 13% of the premium. Sell at market and you hand over $10 of that before the trade has begun; close at market too and the whole $20 is gone. It never shows up as a line on your statement. It just makes every trade start behind. Learn to read the bid, the ask and the mid in how to read an options chain.
What to do about it
Three habits. Use limit orders at or near the mid and let the order sit; if it doesn't fill, the price was wrong, not you. Prefer names with tight spreads (a few cents on a dollar of premium) over names with wide ones, even when the wide one looks juicier. And count the spread when you compare two trades: a premium that looks bigger can be smaller once the spread comes off. The wheel strategy trades the same name many times a year, so the per-year number here is the one to look at.
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