How Does the Bid-Ask Spread Affect the Efficiency of Rolling Options on a Less Liquid Crypto Asset?

The bid-ask spread is the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask). In less liquid crypto assets, this spread is wider.

When rolling, the hedger must cross this wide spread twice (sell at bid, buy at ask), significantly increasing the transaction cost and reducing the efficiency of the hedge. A wide spread is a direct drag on profitability.