> For the complete documentation index, see [llms.txt](https://docs.dreamos.app/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.dreamos.app/pricing-and-spreads.md).
# Pricing and Spreads
Every option on Dream has a bid and ask price. Understanding the difference between these prices is important when opening, managing, and closing positions.
### Bid and Ask
**Bid:** The price a buyer is willing to pay for an option.
**Ask:** The price a seller is willing to accept for an option.
When opening a long options position, you typically buy at the ask.
When closing that position, you typically sell at the bid.
### What Is a Spread?
The spread is the difference between the bid and ask prices.
For example:
|
| Price |
| ----------- | ----- |
| Bid | $80 |
| Ask | $100 |
| Spread | $20 |
| Midpoint | $90 |
In this example, purchasing the option costs $100, while the current bid is $80.
If you immediately sell at that bid, you receive $80 before accounting for applicable fees.
This difference exists because buying and selling occur at different prices.\
\
Suppose the bid is $80 and the ask is $100. You buy at the ask for $100 making your total cost basis $100. If you immediately close the entire position at the $80 bid, you receive $80. Your realized P\&L is ($80 − $100) / $100 = −20%. The underlying asset does not need to move for this difference to exist.
### Why Spreads Vary
Spreads can vary depending on several factors:
* The underlying asset
* Strike price
* Time remaining until expiration
* Market volatility
* Position size
* Available liquidity and the risk assumed by liquidity providers
Contracts with less trading activity or greater pricing uncertainty may have wider spreads.
### How Spreads Affect Your Position
The spread can affect the amount you receive when closing a position, even if the underlying asset's price has not changed.
A wider spread means a larger difference between the price to open a position and the price available to close it.
Dream displays bid and ask pricing so users can review the spread before opening a trade.
When closing a position, the available executable quote determines the amount you can receive.
### Spreads vs. Trading Fees
The spread is not a fee charged by Dream.
It represents the difference between the buying and selling prices offered by liquidity providers.
Dream separately charges a 2% fee on the premium paid to open a position.
Understanding both the spread and the opening fee is important when evaluating the total cost of a trade.
---
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