Couple different things here.
1. If you come from a forex/commodities background, you are much more used to liquidity. For example, the EUR/USD is one of the most liquid trading vehicles on the planet.
With options, you have liquidity split up against different durations, different strikes, and calls/puts. This causes the bid/ask to widen out a little bit more.
If you think about it… the ES futures has a tick size of 0.25. That’s a bid/ask spread of $12.50. So when you look at the SPX options board it’s no surprise to see slightly wider bid/ask spreads because if the market makers need to hedge quick they can easily incur slippage.
It’s just the nature of the game in terms of liquidity.
2. With iron condors, liquidity is also a function of where the market is moving.
Think about this scenario. If the market is ripping then people start chasing by buying calls. That means it will be tougher to buy calls and easier to sell calls. Same goes for call spreads.
If the market is selling off, then it’s easier to sell puts than it is to buy puts. Same for put spreads.
That means if you’re trying to close call spreads, it will be easier to do when the market is selling off vs. rallying.
And if you’re trying to close put spreads, it will be easier when the market is rallying not selling off.
There is some merit with the idea of legging out of a trade simply because of liquidity advantages.
More notes to follow….