Introductory Context
"LTP is the last traded price — the most recent execution, not necessarily your execution price. Your buy order executes at the ask price; your sell order at the bid. The bid-ask spread is the cost of trading and varies widely across strikes. Always use limit orders set between the bid and ask to control your execution price."
LTP — What It Is and What It Is Not
Last Traded Price (LTP) is the price at which the most recent options transaction occurred at this specific strike. It is a historical data point — the most recent historical data point, but historical nonetheless. Between the moment that transaction occurred and the moment you place your order, the bid and ask may have moved. The LTP you see might be from 10 seconds ago or 10 minutes ago depending on how active that strike is.
LTP does not represent what you will pay when you buy or receive when you sell. It is a reference point. Your execution price is determined by the current best ask (for a market buy) or best bid (for a market sell) — or by wherever your limit order sits relative to the current bid-ask.
The LTP Execution Illusion
New options traders place a market order based on the LTP they see, expecting to pay roughly that price. They are surprised to find they paid significantly more (if buying) or received significantly less (if selling). On an illiquid options strike where LTP is ₹50 but the bid is ₹42 and the ask is ₹58: a market buy executes at ₹58 — 16% above the LTP. A market sell executes at ₹42 — 16% below. The LTP of ₹50 is between these but is available to neither buyer nor seller without a limit order.
Bid and Ask — Your Actual Execution Prices
The Bid is the highest price any current buyer is willing to pay for this option — the price you receive when you sell. The Ask is the lowest price any current seller is willing to accept — the price you pay when you buy.
Bid-Ask Spread = Ask − Bid. The spread represents the cost of immediate execution. Every time you buy at the ask and sell at the bid (as you do when placing market orders), you effectively pay the full spread as an implicit transaction cost.
Spread Width Across the Option Chain
Bid-ask spreads vary dramatically across strikes and instruments:
• spread typically ₹1–₹3. Reasonable execution cost: ATM Nifty options (most liquid).
• spread ₹2–₹5. Still acceptable: Slightly OTM Nifty options.
• spread ₹5–₹15 on a ₹20–₹30 premium. Extremely expensive as a percentage: Far OTM Nifty options.
• spread ₹3–₹8 given higher premium levels: ATM Bank Nifty.
• spread ₹5–₹30+ depending on liquidity. Highly variable: Individual stock options.
The practical rule: before trading any options strike, check the bid-ask spread. If the spread is more than 5% of the option's premium, the execution cost is high enough to meaningfully affect your profitability. ATM options consistently have the tightest spreads — one more reason why ATM is the recommended starting point.
How to Place a Limit Order Using Bid-Ask
The correct approach to placing an options order using the bid-ask:
Buying an Option
Start your limit at the midpoint: (Bid + Ask) ÷ 2. If bid is ₹95 and ask is ₹103, start at ₹99. Wait 30 seconds. If unfilled, move to ₹100, then ₹101. If still unfilled and the market is moving against you quickly, go to ₹102. In liquid Nifty ATM options, this process takes 30–90 seconds and almost always achieves a better execution than a market order.
Selling an Option
Start your limit at the midpoint or slightly above. If you need a fast exit and the market is moving against you, set the limit at or slightly below the current bid — this ensures immediate execution. Never use a market sell order — you will receive the bid price in the best case, and potentially worse in fast markets.
The 30-Second Limit Order Rule
Place your limit at mid-point. Wait 30 seconds. If unfilled, adjust by ₹0.50–₹1 toward the ask (for buys) or bid (for sells). Repeat once or twice more if needed. In liquid Nifty ATM options, this process takes under 2 minutes total and typically achieves a price better than the ask — saving ₹1–₹3 per unit, or ₹75–₹225 per lot. Across many trades over a year, this discipline creates meaningful additional returns.
Why Spreads Widen at Market Open and Close
Bid-ask spreads are not constant throughout the trading day. They are typically widest in the first 15 minutes after market open (9:15–9:30 AM) and in the final 30 minutes before market close (3:00–3:30 PM) — particularly on expiry Thursday. During these periods, market makers face more uncertainty and widen their spreads to protect against directional risk. For options traders using limit orders, this means your mid-point orders may take longer to fill during open and close periods. For market order users, these are the most dangerous execution windows.
The LTP column tells you what the last person paid. The Bid and Ask columns tell you what you will pay or receive. These are the most practically important columns on the entire option chain for trade execution. Reading the LTP is useful for context. Reading the bid-ask is essential for every order you place.