Stop Bleeding Money on Options Fills

How to keep more edge, avoid avoidable slippage, and execute like someone who actually cares about their P&L

Here's the thing nobody tells you when you start trading options: you can be right about direction, right about timing, even right about volatility, and still lose money. How? You're getting fleeced on every entry and exit, one nickel at a time.

I've watched traders nail a great setup, only to immediately give back 5-10% of their profit potential by hitting market orders like they're trading SPY shares. Here's the reality: options aren't stocks. The spreads are wider, the liquidity is thinner, and every careless click is a donation to market makers who are very happy to take your money.

The good news? This is completely fixable. You just need to understand a few core principles and build some basic habits. Let's get into it.

The 60-Second Framework That Will Save You Thousands

If you take nothing else from this article, remember this:

For options, use limit orders almost always. If you need instant fills, use a marketable limit, that's a limit order that crosses the spread by a sensible amount. Save true market orders for the rare moments when spreads are razor-thin (think SPY, QQQ) or when you're exiting a stressed position where pennies don't matter but risk does.

That's it. That's the whole thing. Everything else is just implementation details.

Why You Should Actually Care About This

Stocks are forgiving. Their spreads are tight, their order books are deep, and if you mess up an entry by a few pennies, it's not the end of the world. Options don't work that way.

Options spreads widen when you least expect it. Quotes flicker. And every nickel you give up on entry or exit compounds across dozens of rolls, scale-ins, and multi-leg trades. This isn't theoretical, it's literally part of your edge as a trader. Treat it that way.

Market vs. Limit: What You're Actually Doing

Market order: "Fill me now at whatever the market is." Fast, sure. But you just surrendered all control over price.

Limit order: "Fill me only at this price or better." Slower sometimes, but you control slippage.

Options are priced off volatility, not just supply and demand. When IV jumps or liquidity thins, the bid-ask spread becomes a tax. Limit orders are your tax shield.

Understanding the Bid-Ask Spread (And Why It's Basically a Toll Booth)

Let's say you're looking at a call that shows:

Bid: $1.15 | Ask: $1.35

The mid-price, theoretical fair value, is around $1.25.

If you buy at $1.35 with a market order, you just "tipped" the market $0.10 immediately. On ten contracts, that's $100 gone at entry. Do that across 50 trades a year and you've quietly paid for a nice vacation. Except instead of drinking margaritas on a beach, you handed the money to a market maker.

Now scale this to a four-leg iron condor or ratio spread. One bad fill can double the cost you intended to pay or halve your credit. This is why professionals default to limits.

The Actual Process (Simple, Repeatable, Effective)

Here's what I do on every trade. It takes an extra 20-30 seconds and consistently saves me money:

1. Start at Mid

Enter your order at mid-price. If you're buying, you can add a penny (mid + $0.01). If you're selling, subtract a penny (mid - $0.01).

If nothing happens after 10-20 seconds, don't panic. The NBBO (national best bid/offer) is just a snapshot. The actual order book is deeper and often negotiable.

2. Walk the Order

Improve your price by $0.01-$0.03 every 5-15 seconds until you get filled.

If the spread is wide (more than $0.30), use $0.05 steps instead.

Before you start, decide on your worst acceptable price. If you hit that cap without a fill, cancel and reassess. Maybe the market moved. Maybe your strike choice is illiquid. Either way, don't chase.

3. Make It Marketable, On Purpose

When you truly need a fill right now, send a marketable limit:

Buying: Set your limit at or a few cents above the ask. In SPY/QQQ, $0.01-$0.03 above is usually enough. In thinner names, $0.05-$0.10.

Selling: Set your limit at or slightly below the bid by a similar amount.

You get the speed of a market order with the safety of a limit. Best of both worlds.

4. Use Time-in-Force Settings Smartly

DAY orders work fine for most entries.

GTC (Good-Til-Canceled) is useful for exits at profit targets, especially on credit spreads.

When a Market Order Is Actually Fine

Look, I'm not going to tell you market orders are never appropriate. There are three situations where they make sense:

You're trading ultra-liquid underlyings with penny spreads (SPY, QQQ, IWM, mega-cap weeklies) and you're only doing one or two contracts.

Emergency exits where the risk of waiting exceeds the cost of slippage. Fast-moving tape, broken thesis, risk limits breached, just get out.

Closing worthless options near expiration where the natural offer is $0.01 and you just want out.

Even in these cases, a marketable limit is usually cleaner. But I won't judge you for hitting a market order on SPY weeklies when you're working with lunch money.

When a Market Order Is an Expensive Mistake

Never use market orders in these situations:

Wide spreads. If the spread is more than $0.15 on a $1-$2 option, or more than $0.30 on a $2+ option, you're asking to get hammered.

Multi-leg spreads. Iron condors, butterflies, calendars, anything where your platform has to price multiple legs at once. Market orders can blow past your intended risk.

Near the open or close. Quotes are jumpy and liquidity providers are defensive. You'll get picked off.

Low-volume tickers. Odd expirations, deep OTM strikes, illiquid weeklies, just don't.

The "Penny Saved" Math That Changes Behavior

Let me show you why this actually matters:

Ten-contract order, $0.05 better fill than the ask = $50 earned at entry.

Repeat 40 times a year = $2,000 of edge recovered, before compounding.

Exits matter too: catching $0.03 more on a credit close is another $30 per trade.

Professional execution is boring. It's also profitable.

The Hidden Tax That's Destroying Your Returns

Here's where it gets real. Let's say you're giving up just $0.02-$0.03 per contract on both entry and exit. Seems trivial, right? Watch what happens.

The Basic Math (10 Contracts Per Trade)

Slippage on entry: $0.03 × 10 contracts = $30

Slippage on exit: $0.03 × 10 contracts = $30

Total slippage per round trip: $60

Now let's scale this over 100 trades in a year:

$60 × 100 trades = $6,000 in slippage

That's $6,000 you paid for the privilege of being sloppy with your order entry. You didn't lose this money on bad trades, you gave it away before your thesis even had a chance to play out.

The Portfolio Impact (This Gets Ugly)

Let's assume you're trading with a $50,000 account and averaging 100 trades per year. Here's what that $6,000 in annual slippage actually costs you:

Year 1: $6,000 lost to slippage = 12% of your account value gone

Think about that. If you made a 20% return on your actual trades, you really only kept 8% after slippage. Your report might say you're up 20%, but slippage ate 12 percentage points of that return.

Now let's look at the compounding damage over time. Let's say you're a profitable trader who consistently makes 15% annual returns on your trade decisions. Here's what happens with and without fixing your execution:

Scenario A: Sloppy Execution ($6,000/year slippage on $50k account)

Starting account: $50,000

Year 1: 15% gross return = $7,500, minus $6,000 slippage = $1,500 net → $51,500

Year 2: 15% gross return = $7,725, minus $6,000 slippage = $1,725 net → $53,225

Year 3: 15% gross return = $7,984, minus $6,000 slippage = $1,984 net → $55,209

Year 5: Account grows to $60,551

Year 10: Account grows to $78,336

Scenario B: Professional Execution (minimal slippage, saving $5,000/year)

Starting account: $50,000

Year 1: 15% gross return = $7,500, minus $1,000 slippage = $6,500 net → $56,500

Year 2: 15% gross return = $8,475, minus $1,000 slippage = $7,475 net → $63,975

Year 3: 15% gross return = $9,596, minus $1,000 slippage = $8,596 net → $72,571

Year 5: Account grows to $93,279

Year 10: Account grows to $172,318

The Difference: $93,982

Let me say that again. Over 10 years, sloppy execution cost you nearly $94,000 on a starting account of just $50,000. That's not a typo. That's not dramatic. That's just math.

In percentage terms, the professional execution scenario delivered a 13% annualized return while the sloppy execution scenario only delivered 4.6% annualized return, even though both traders made identical trade decisions with identical 15% gross returns.

The Percentage Drain

On a $50,000 account doing 100 trades per year:

$6,000 annual slippage = 12% of account value lost to execution every single year

On a $100,000 account with the same trade frequency: 6% annual drag

On a $25,000 account: 24% annual drag (devastating)

Here's the brutal truth: if you're a retail trader with a smaller account, sloppy execution can be the difference between building wealth and spinning your wheels. You can be right about direction, right about timing, right about volatility, and still end up with mediocre returns because you're hemorrhaging money on every fill.

What If You Trade More Frequently?

Active traders doing 200 trades per year? Double all those numbers. You're now looking at $12,000 in annual slippage on a $50,000 account, that's a 24% drag on your portfolio. At that rate, you'd need to generate 24% gross returns just to break even.

The math is unforgiving. The more you trade, the more execution discipline matters. You can't trade your way out of bad execution, you can only fix your execution.

The Bottom Line

Every $0.02-$0.03 you give up per contract, twice per trade (entry and exit), compounds into portfolio-destroying losses over time. It's death by a thousand cuts, except each cut costs you $60, and you're making 100+ cuts per year.

This isn't about being perfect. It's about being intentional. Take the extra 20 seconds to work your orders properly. The difference between sloppy and professional execution could be worth six figures over a decade.

Still think those extra pennies don't matter?

Real-World Examples (So This Actually Sticks)

Example 1: Buying a Call Debit Spread

Quote: $1.80 x $2.20 (mid $2.00)

Your plan: Pay $2.06 or better.

What you do: Send limit at $2.00 → no fill after 10 seconds → adjust to $2.02 → nothing → $2.04 → filled in 20 seconds.

Result: You kept $0.16 per spread versus a market buy at $2.20. On 10 spreads, that's $160.

Example 2: Closing a Short Put for Profit

Quote: $0.14 x $0.18 (mid $0.16)

You want out at $0.16. Send it. No fill after 15 seconds. Adjust to $0.17. Filled.

Result: You saved $0.01 per contract versus a market buy at $0.18. Trivial on one trade, meaningful across 200 closes per year.

Example 3: Iron Condor Entry in a Choppy Tape

Net credit quote: $0.92 x $1.12 (mid $1.02)

Start at $1.02. Walk to $1.00, then $0.98. No fill? Re-check the underlying move; re-price. Eventually filled at $0.99.

Result: A market sell might have printed at $0.92-$0.95. You kept $0.04-$0.07 of credit.

Guardrails (So You Don't Talk Yourself Into Bad Fills)

If you've walked more than half the spread, stop. Either the market moved or the mid wasn't real. Cancel and reassess.

Don't chase during news bursts. Let the first minute pass. Then reassess IV and spread width.

Respect liquidity. If open interest is thin or the chain is sleepy, either price further from mid or choose a different strike/expiration.

Quick Decision Tree

Do I need the fill immediately?

No → Limit at mid, walk the order

Yes → Marketable limit (slight cross)

Is the spread wide?

Yes → Smaller size, bigger increments, tighter "no-go" price; consider alternate strikes

No → Standard walk; expect quick fills

Is it a multi-leg order?

Yes → Work the net; if stuck, leg with intention (and know your temporary delta)

No → Single-leg rules apply; stay disciplined

Questions You Probably Have Right Now

Q: Why not just set a limit at the ask when buying (or bid when selling) and be done?

A: Because you'll overpay systematically. Many option books will meet you closer to mid if you give them the chance. Over a year, that adds up.

Q: My platform has a "mid-price" button. Should I trust it?

A: Use it as a starting point, not gospel. Walk in small steps and you'll often get price improvement.

Q: What about after hours?

A: Options don't trade after hours (with very limited exceptions). Don't queue market orders you can't supervise at the open. Use prudent limits during regular hours.

Q: Is there ever a reason to prefer market orders?

A: Yes, risk triage. If your risk limits are breached or a thesis is broken, execute first, debrief later. Just prefer marketable limits to put a ceiling on damage.

The Habits That Separate Disciplined Traders

Pre-commit to a worst price before you click.

Log your fills and note spread width and steps taken.

Trade liquid underlyings when possible.

Teach yourself to wait 20-40 seconds before sweetening a price. That tiny pause is often the difference between mid and the offer.

The 10-Second Cheat Sheet

Default: Limit at mid → walk

Urgent: Marketable limit (never blind market, if you can help it)

Wide spreads / multi-leg: Smaller size, work the net, cap your walk, reconsider strikes

Open/Close: Spreads widen; be conservative

Track your slippage: What gets measured gets improved

Final Word

Options trading is a game of probabilities and process. Your entries and exits are part of that process. Use limits to protect your edge. Use marketable limits to control urgency. Treat every fill like it came out of your P&L, because it does.

Over hundreds of trades, these small choices compound. They're the difference between being right and being profitable.

Now go save yourself some money.

Probabilities over predictions,

Andy Crowder

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Disclosure: Options involve risk and are not suitable for all investors. Past performance is not indicative of future results.