i think is normal management in illiquid market the bid ask spread is tight when more money are in and mm can play good
Beware, Options Investors: You Pay a High Trading Price Compared With Stocks Options on stocks and ETFs had much bigger bid-ask spreads than those for the stocks and ETFs themselves A George Mason professor ran the numbers on options spreads. Illustration: Beth Goody By Derek Horstmeyer April 7, 2023 10:00 am ET When financial markets are volatile, many investors head to the options market, either for downside protection or to make a bet on which way things could be heading. With this in mind, we decided to test just how costly it is to trade options, which give the holder either the right to buy or the right to sell an asset at a set price within a given amount of time. We judged the costliness of trading each option by the spread between its bid and ask prices—the price the option can be sold for and the higher price a buyer will pay, respectively (measured midday each day of the week). The difference between the two goes to the market maker who executes the transaction. That spread is often expressed as a percentage of the ask price. The bigger the spread between bid and ask prices, the bigger that percentage number and the costlier the transaction. A spread of 2% on an option, for instance, means you need to realize a 2% return just to break even if you buy that option and later sell it. A steep price What we found is that the options on stocks and exchange-traded funds that we studied generally had much bigger bid-ask spreads than those for the stocks and ETFs themselves. My research assistants (Clarita Orosco and Hsiung Huei Lee) and I studied one-month and one-year options for the 10 most heavily traded stocks and ETFs from the start of this year through March 15. We looked at the spreads for each contract at midday of each trading day so that all spreads were being actively quoted, and took other precautions to avoid outlier readings. The median bid-ask spread for a one-month call option “at the money”—an option to buy a stock or ETF, with the security currently trading at the set price—was 1.78% during this period. The stocks and ETFs we were tracking along with their options had bid-ask spreads of between 0.02% and 0.10% over the same period. This means an investor could be paying nearly 100 times the bid-ask spread on an option as compared with the underlying stock or ETF. Spread factors In general, out-of-the-money options were more expensive than in-the-money options. An option is in the money when the market price of the underlying security is above the set price, in the case of a call option, or below the set price, in the case of a put option, which is an option to sell a security. Finally, the longer the time left before an option expires, the wider the spread tends to be. So long-term bets on the direction of a stock or ETF are more expensive than shorter-term bets. It should be noted that the bid-ask spreads we found were for the most heavily traded stocks and ETFs. When you venture into more thinly traded securities, it isn’t uncommon to see bid-ask spreads over 10%. All in all, the options market is a costly place to trade, compared with the stock market. Investors should consider those costs whether they’re using options as protection against steep market declines or they’re speculating on where the market is headed. Dr. Horstmeyer is a professor of finance at George Mason University’s business school in Fairfax, Va. He can be reached at reports@wsj.com.
Absolutely. There are even MM that refuse to put a bid when they forget to hedge their position! https://www.elitetrader.com/et/threads/lack-of-bid-offer-on-aci-call-19-april-expiration.373378/