How to Filter for Tight Bid-Ask Spreads

Everyone should use this recipe in their bots to automatically filters for tight bid-ask spreads before entering a new position.
Kirk Du Plessis
Mar 25, 2021

Tight bid-ask spreads are a sign of highly liquid securities and provide traders with efficient pricing. With bots, you no longer need to manually search for optimal spreads. Bots actively scan a ticker’s options pricing and will not send an entry order if the spread is wider than you prefer.

The decision recipe for comparing a ticker’s bid-ask spread allows you to reference the current bid-ask spread before moving through an automation. You can use the recipe to prevent the bot from trading illiquid strike prices and specifically tell the bot the maximum bid-ask spread you are willing to trade.

To use this powerful recipe, precede another decision with your preferred bid-ask spread width so you can define the maximum bid-ask spread you want to target. For example, you can input criteria, so a trade is not entered if the spread is wider than $0.05.

The bot pulls current market pricing to ensure that the bid-ask spread is not too wide before sending an order to the broker for execution. For example, if the spread is above $0.05, the automation will end and wait to evaluate the spread width at the next interval.

You can always test the automation. The test will immediately let you know if current market conditions have the desired bid-ask spread width and show you the current spread width for comparison.

This tool provides you with an intelligent way to ensure you’re trading what you want and lets the bot automate the tedious process of monitoring attributes for you, such as the bid-ask spread. This video is another creative example of how you can leverage bots’ power to make decisions based on your detailed criteria.

No tags found.

Trade smarter with automation