Reading the book, not the last print

A market showing 63¢ is telling you what happened, not what is available. The number you can act on is somewhere in the book: how much is resting at 63, how much at 64, and how far you have to walk before your order is filled.

Three numbers that beat the last print

• The spread. The distance between the best bid and the best offer is your immediate cost of being wrong about direction. On thin contracts it dwarfs the edge people think they have.
• The depth. How much size sits at each level. A tight spread on one contract of depth is a quoted fiction.
• The effective price at your size. Walk the book to the quantity you actually want and average it. That is your real entry, and it is the only one worth putting in a spreadsheet.

Last print

history

one lot, some time ago

Top of book

an offer

for a specific size

Effective fill

your price

depth-weighted, after fees

Why thin markets punish conviction

The contracts with the largest apparent edge are usually the ones nobody is quoting. That is not a coincidence: the spread is wide because participants are unsure, and being unsure is precisely the condition under which you get filled by someone who knows more than you.

None of this argues against trading illiquid contracts. It argues for pricing the illiquidity into the edge before you decide the edge exists.