Decision Recipes

Comparing Opportunity Bid-Ask Spread

Comparing opportunity bid-ask spread allows you to reference a position’s bid-ask spread before moving through the automation. Here is how to use it.
Comparing Opportunity Bid-Ask Spread
Steve Henry
May 24, 2021

The decision recipe for comparing opportunity bid-ask spread has three inputs:

  • Opportunity
  • Greater than/less than/equal to
  • Value

This decision recipe allows you to reference a position’s bid-ask spread before moving through the automation.

Screenshot displaying the decision recipe for comparing opportunity bid-ask spread

The first field prompts a dropdown menu to choose a position type. The decision recipe will then prompt you to choose a ticker symbol and, if it is an options position, add the details of the options legs.

Screenshot of the decision recipe's dropdown menu criteria

The second field prompts a dropdown menu to choose if the bid-ask spread is greater than, less than, or equal to the third field, where you manually input the spread’s size. When you have finished creating the recipe, select “Save.”

Screenshot highlighting the save button following the decision recipe inputs

NOTE: You can also create a custom input, which allows you to input the field later to make the decision recipe dynamic across all automations.

You have the option to add more decisions to the recipe or return to the automation editor. When finished, select “Save” again to return to the automation editor.

Screenshot highlighting the save button to return to the automation editor

The automation editor will display your completed decision criteria for comparing opportunity bid-ask spread.

Screenshot highlighting the decision recipe within the automation editor

You can always select the decision inside the automation editor and make changes to the criteria.

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Evaluating Opportunity Probabilities
Evaluating opportunity probabilities allows you to evaluate a position’s probability of profit to filter for opportunities when adding new positions.
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FAQs

What is a Bid/Ask Spread and why is it important?

The bid/ask is a spread which helps determine the price of a security. The bid is what someone is willing to pay, and the ask is what someone is willing to offer. The mid is usually the mid-point of these two and can be the price you get filled for. Spreads that are more narrow are indicative of good liquidity, and thus a better price.

Can a Bid/Ask spread be an indication of liquidity?

Yes, in fact it is an indication of liquidity

How can a see the actual Bid/Ask spread reading when I start to run my bot?

In order to see the actual bid/ask in real-time you will need to monitor your brokerage platform.

Why is a tight (or small) Bid/Ask spread important to most traders?

The tighter the bid/ask the more consistent the potential for good pricing.

Can this calculation be done on stock or is it for options only?

It can be used for both stocks and options.

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