Understanding Bid-Ask Spreads in Futures
By Ethan Warmuskerken · 6 min read
Learn how futures bid-ask spreads work, why they widen during volatile sessions, and how spread cost affects entries, exits, and funded account risk.
The bid-ask spread is a fundamental concept in futures trading. Understanding how it works helps you see the actual cost of entering and exiting positions.
What is the Bid?
The bid is the highest price a buyer is willing to pay for a contract at that moment. If you're selling a contract, you'll receive the bid price.
What is the Ask?
The ask (or offer) is the lowest price a seller is willing to accept for a contract. If you're buying a contract, you'll pay the ask price.
The Spread
The spread is the difference between the bid and ask prices. This represents the cost of immediate execution and varies based on market liquidity.
Example
ES (E-mini S&P 500):
If you buy at the ask (5,850.25) and immediately sell at the bid (5,850.00), you lose 0.25 points or $12.50 per contract.
- Bid: 5,850.00
- Ask: 5,850.25
- Spread: 0.25 points (1 tick)
Tight vs Wide Spreads
Tight spreads (1-2 ticks) are common in highly liquid markets like ES, NQ, and YM during regular trading hours.
Wide spreads (multiple ticks) occur in less liquid markets or during off-peak hours, increasing the cost of immediate execution.
Market vs Limit Orders
Market orders execute immediately at the current bid (selling) or ask (buying) price.
Limit orders let you specify your desired price, potentially saving the spread cost, but execution is not guaranteed.
Common Futures Spread Examples
| Market | Symbol | Typical Spread | Dollar Value |
|---|---|---|---|
| E-mini S&P 500 | ES | 1 tick (0.25 pts) | $12.50 |
| E-mini Nasdaq | NQ | 1 tick (0.25 pts) | $5.00 |
| Micro E-mini S&P | MES | 1 tick (0.25 pts) | $1.25 |
| Micro E-mini Nasdaq | MNQ | 1 tick (0.25 pts) | $0.50 |
| Crude Oil | CL | 1 tick ($0.01) | $10.00 |
| Gold | GC | 1 tick ($0.10) | $10.00 |
Key takeaways
- The bid is where sellers can hit demand.
- The ask is where buyers can lift supply.
- Wider spreads increase effective trade cost.
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