What can cause slippage in options trading?

Slippage in options trading typically occurs due to market conditions that disrupt the expected price at which an order is executed. Market volatility can lead to price fluctuations that happen quickly, causing the execution of an order at a different price than anticipated. This is especially evident in fast-moving markets where prices can shift dramatically in seconds.

Low liquidity can also contribute to slippage because it means there are fewer buyers and sellers in the market, making it harder to execute an order at the desired price. When liquidity is low, even small orders can significantly impact prices, leading to less favorable execution than initially expected.

In contrast, high liquidity often helps mitigate slippage as a larger number of participants in the market allow for smoother and quicker order executions at expected prices. Stable market conditions also typically reduce volatility, helping to ensure that market prices remain steady during order execution. Immediate order execution is ideal for avoiding slippage but, in reality, it does not guarantee that orders will be filled at the intended prices when market conditions are challenging.