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4 years ago

Options traders saving big bucks with lower-than-expected trading costs!

Review of Financial Studies
Options Trading Costs Are Lower than You Think
Dmitriy Muravyev, Neil D. Pearson

Paper Summary

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Options trading costs are lower than previously thought because traders can predict price changes and time their trades effectively. By buying when the option price is close to the ask and selling when it's close to the bid, traders reduce their effective spreads by 40%. This means that the overall average effective spread is 25% smaller than previously estimated. These findings change our understanding of how profitable options trading strategies can be.