Video Summary (2 minutes)
Trade execution in options is just like submitting an order in stock, with a limit price, and a current Bid/Ask. In options spreads, even though it involves multiple legs in an order sent to an exchange as a package, it is presented the same way. A limit price, in relation to the current bid/ask. However the bid/ask you see for a spread is the combined bid/ask of the legs. That can mean even wider bid/asks on spreads AND, that bid/ask may not be indicative of exactly where that spread could be executed. Therefore, with spreads, investors sometimes ‘work’ their limit price to find the liquidity. By ‘working’ an order we mean placing an order at a limit price where we would hope to be filled, perhaps at or near the ‘mid’, and if not filled, potentially walking that price higher, if buying, or lower, if selling.