You’ve often heard us talk about the important of trading liquid options until you are blue in the face right? Well today we’ll put a dollar figure to this concept and show just how much “slippage” is costing you trading options that are illiquid.
Specifically markets that show a bid/ask spread of just $0.20 could end up costing you more than $3,840 each year - and that’s just the cost of getting into or out of the trade!
As traders we focus too much on our commission costs and rarely if ever do you “feel” the pain that slippage costs your portfolio. It’s time we stop worrying less about commissions and more about slippage by focusing on only highly liquid options and underlying stocks.