What Is the Significance of the ‘Mid-Price’ When Calculating the Value of an Options Trade?

The mid-price, which is the average of the bid and ask prices, is often considered the theoretical fair value of an options contract at a given moment. It is used as a reference point for execution quality.

When a trade is executed exactly at the mid-price, it represents zero cost of immediacy (zero slippage) relative to the spread. Traders often use the mid-price as the target for limit orders to achieve the best possible execution.