How Does the Moneyness (ITM, OTM, ATM) of an Option Affect Its Bid-Offer Spread?

At-the-money (ATM) options often have the tightest spreads because they are the most actively traded and have the highest liquidity. Deep in-the-money (ITM) and deep out-of-the-money (OTM) options typically have wider spreads.

This is because OTM options have a low probability of being exercised, making them less attractive to trade, and deep ITM options have a high premium and are less sensitive to price changes, resulting in lower liquidity for both.