How Does the Bid-Ask Spread on an Option Relate to Its Implied Volatility?

The bid-ask spread on an option is generally wider when the implied volatility (IV) is high. High IV implies greater uncertainty and risk, causing market makers to widen their spreads to compensate for the increased inventory risk.

Conversely, options with low IV and high trading volume typically have tighter spreads. Liquidity, however, remains the primary driver of spread width.