How Do “Block Trades” in Options Markets Minimize the Impact of Slippage?

A block trade is a privately negotiated, large-volume transaction that is executed away from the public exchange's order book. By trading over-the-counter (OTC) or through an electronic crossing network, the buyer and seller agree on a price, often the mid-price, which is then reported to the exchange.

This method bypasses the public order book, preventing the large order from consuming all available liquidity and thus minimizing the market impact and slippage that would occur on the exchange.