What Is a “Commission-Free” Options Trade and Where Is the Cost Usually Hidden?

A "commission-free" options trade means the broker does not charge a direct fee to the client for executing the transaction. However, the cost is often hidden in two primary ways.

First, the trader still pays the implicit cost of the bid-ask spread. Second, the broker may engage in Payment for Order Flow (PFOF), where they sell the client's order to a market maker.

The market maker executes the trade and profits from the spread, potentially giving the retail trader a slightly less favorable price than they might have received elsewhere. This difference in execution price is the hidden cost.