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Price improvement

Executing better than the prevailing best quote — buying below the national offer or selling above the national bid — usually in fractions of a cent per share.

Slippage on a market orderA buy order clears four price levels, so the average price paid is worse than the price first quoted.Buy 1,000 shares at marketpricesell orders resting (bar length = size)20.04300 shares20.03200 shares20.01200 shares20.00300 sharesnothing resting at 20.02order sweeps up the bookaverage fill 20.02SLIPPAGE0.02 a share$20.00 in totalintended 20.00Each level fills at its own price; the average is what you really paid.
Slippage on a market order. You click at 20.00, but only 300 shares are resting there, so the rest of the order fills at 20.01, 20.03 and 20.04. The average price paid is 20.02, and that two-cent gap is slippage.

Options exchanges run price-improvement auctions in which a marketable order is shown to participants for a fraction of a second before executing. Competing responses can fill it inside the nbbo.

It is one of the few genuinely free things in trading, but it depends on routing. Improvement is usually reported in cents per contract on your monthly statement, and it is worth checking whether your broker delivers any.

Example: you buy 10 contracts with the NBBO at 1.24 / 1.27. The auction fills you at 1.255. The improvement is $0.015 × 100 × 10 = $15. Small per trade, meaningful across 200 trades a year, and invisible unless you look for it.

Related: nbbo, mid-price, payment-for-order-flow

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