The truth about bid, ask & fills — why you never get mid
Buyers pay the ask (higher), sellers receive the bid (lower). That gap (the spread) is your real trading cost.
Backtest looks great but you lose in real life? Usually the fill price was assumed wrong. Start with the truth about quotes.
Walk through where you actually get filled when you buy and sell.
Bid and ask
- ·Ask = the price the market will sell at now. To buy, you pay this (higher).
- ·Bid = the price the market will buy at now. To sell, you receive this (lower).
- ·Spread = ask − bid. This gap leaks on every trade.
So buyers pay up (ask) and sellers receive less (bid). Mid is just a display price — real fills are not always at mid.
Why it matters
Backtesting at mid effectively hands you half the spread for free every time, inflating results — especially for wide-spread options (deep OTM, illiquid).
Example: sell a put with bid 1.00 / ask 1.20. At mid (1.10) you book 1.10, but you really sell at the 1.00 bid — 0.10 worse. Closing pays the spread again.
In NOSKA
NOSKA assumes conservative worst-side fills — sells enter at bid and exit at ask, buys enter at ask and exit at bid — so backtests sit closer to reality.
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