What Is the Risk of Using a Market Order in a Low-Liquidity Options Market?

The primary risk of using a market order in a low-liquidity options market is significant slippage. In a low-liquidity market, the order book is shallow, meaning there are few contracts available at the best bid/ask price.

A market order, which demands immediate execution, will "walk the book," executing against increasingly worse prices until the entire order is filled. This can result in an execution price far worse than the last traded price, leading to unexpectedly high transaction costs.