Therefore, the bid-ask spread tells you how much money you would lose if you purchased something at the asking price and sold it at the bidding.
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- Options Trading and the Bid-Ask Spread of the Underlying Stocks
- Bid Vs Ask Explained: Options - Raging Bull
Hopewell, M. Hull, J. Leland, H. McInish, T. Neal, R. Stoll, H. Tinic, S. Tse, Y. Download references. Beng-Soon Chong, David K. You can also search for this author in PubMed Google Scholar.
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Correspondence to Beng-Soon Chong. Reprints and Permissions. Chong, BS. Review of Quantitative Finance and Accounting 21, 5—15 Download citation. Issue Date : July Search SpringerLink Search. Abstract The paper ascertains the relation between bid-ask spreads and the contract maturity of OTC currency options.
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Options Trading and the Bid-Ask Spread of the Underlying Stocks
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Registered: Theoharry Grammatikos. This study shows that options listing significantly affects the spreads on the underlying stock. The authors identify a trade-off between the benefits of increased liquidity and the cost of informational externalities.
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Highly liquid stocks tend to have spread increases, while illiquid stocks experience spread decreases. Believe it or not, the simple reason for this is because most traders prefer to trade round numbers for strikes. OptionsPlay methodology for checking liquidity making the assessment simple. Tony Zhang is a specialist in the financial services industry with over a decade of experience spanning product development, research and market strategist roles across equities, foreign exchange and derivatives.
Bid Vs Ask Explained: Options - Raging Bull
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