One of the biggest frustrations in options trading is dealing with wide bid-ask spreads. If you’ve traded long enough, you’ve probably found yourself eyeing a great setup, only to balk at the numbers staring back at you in the options chain.
Wide spreads can eat into your profits and make even winning trades feel like a losing battle. Let’s break this down and find ways to navigate these challenges effectively.
During a recent live session, I vented about a common issue with spreads, particularly on Electronic Arts (EA), in this instance. Despite being a solid setup, the spread was annoyingly wide, making it tough to execute with confidence.
“Why do they make the spread wide?” someone asked.
My answer? It’s the market maker — who is most often not your friend.
Spreads widen when liquidity dries up or when market makers want to hedge their risk. That’s why you’ll see tighter spreads on highly liquid names, and wider ones on less active options.
It’s not always fair, but it’s something we need to manage.
Choosing Deltas: The Key to Strong Setups
Delta is a critical metric in options trading, and I use it as a starting point for every trade setup. For example, when I discussed potential options plays in Robinhood (HOOD) and Hims & Hers Health (HIMS), I zeroed in on options with deltas between .65 and .77.
Why? Because these options balance directional exposure with reasonable costs.
Take HIMS as an example. A .69 delta, Dec. 27 expiration, $28.50 strike call stood out as a viable choice. With a delta in this range, you’re getting a solid balance between premium price and responsiveness to the underlying stock’s movement.
Now, let’s talk about the practical side of trading in these conditions.
Wide spreads don’t mean you should abandon the trade — but you need to adjust your strategy. Limit orders are your best friend here. Never take the market maker’s first offer unless you enjoy throwing away money.
For EA, I explored alternatives like a Dec. 20 call with a .79 delta, but even that had a wide spread. If you’re stuck with these options, scale down your position size or look for a different trade altogether.
No setup is worth overpaying — especially if the underlying stock doesn’t offer substantial upside.
The bottom line is trading isn’t just about spotting the right opportunities — it’s about executing them efficiently. Whether it’s navigating wide spreads or choosing the right deltas, small adjustments can make a big difference.
And remember, the market maker isn’t doing you any favors.
That’s why you need to approach each trade with precision and discipline. Keep your focus sharp, your orders smart, and your spreads tight.
After all, it’s your money on the line — not theirs.
I hope that helps!
