The bid and ask are two important prices in options trading. The bid price is the highest price a buyer is willing to pay for an option, while the ask price is the lowest price a seller is willing to accept for an option.
The bid and ask prices are determined by the supply and demand of the option. When there are more buyers than sellers, the bid price will increase and the ask price will decrease. Conversely, when there are more sellers than buyers, the bid price will decrease and the ask price will increase.
Traders who want to buy an option will typically pay the ask price, while traders who want to sell an option will typically receive the bid price. The difference between the bid and ask price is known as the spread, which represents the cost of trading an option.
In summary, the bid price is the highest price a buyer is willing to pay for an option, while the ask price is the lowest price a seller is willing to accept for an option. The spread between the bid and ask price represents the cost of trading an option.
