Why Options Fills Get Ugly Around Holidays
· 4 min read
It’s a quiet Saturday of a long weekend, and I’m going back through last week’s fills because two of them felt worse than they should have. Not bad trades. Bad fills. The kind where the price you clicked and the price you got are further apart than a normal Tuesday would ever allow.
Both were placed the session before a market holiday. That’s not a coincidence, and it’s not something I’d fully mapped out until I sat down and actually thought through the mechanics this weekend.
Volume drops first. Liquidity drops harder.
Everyone knows volume gets thin the day before a three-day weekend. Desks are half-staffed, a chunk of retail flow just isn’t there, and the tape looks lazy. That part’s obvious and it’s been written about plenty, including the general bid-ask-and-slippage piece I’ve got elsewhere on this site.
What doesn’t get talked about enough is that liquidity — the actual depth sitting on the bid and the ask — pulls back faster and further than volume does. Volume is a lagging read on what already happened. Liquidity is a live decision market makers make about how much size they’re willing to stand behind right now. And their calculus changes before the holiday session even opens.
Why market makers pull back on purpose
A market maker’s job is to always be quoting both sides, and they get paid for that by capturing the spread. But the spread they charge is priced to cover the risk of holding inventory until they can offload it. In a normal session, that risk window is short — minutes, sometimes seconds. Going into a holiday, the next session where volume normalizes might be two or three calendar days out, and futures can gap over a long weekend on news nobody saw coming.
So they do the rational thing: widen the quoted spread and shrink the size shown at each price level. It’s not that they stop making markets. It’s that they reprice the risk of sitting in a position through a holiday, and that reprice shows up as a wider, thinner book exactly when you’re trying to get filled.
Why this hits options harder than stock
If you’re trading the underlying stock itself, a holiday-week liquidity pullback is a nuisance. Stock is already a deep, continuously two-sided market most of the time, so a haircut off an already-thick order book is still usually enough size to absorb your order without much damage.
Options don’t start from that same depth. Even a heavily traded name might have real size sitting only a few strikes around the money, and a lot of that size is itself hedged by the market maker’s stock position — which they now also want to trade less actively into a long weekend. Thin liquidity compounding on top of liquidity that was already thinner to begin with is a different animal than stock’s small haircut on a deep book. You’re not just paying a slightly wider spread. You can be paying a meaningfully wider spread on a market that had less depth to spare in the first place.
What a slipped fill actually looks like
Picture a contract that normally quotes a nickel wide with real size on both sides — the kind of market where a market order barely moves the print. The session before a holiday, that same contract might show a quote three or four times as wide, with a fraction of the usual size resting at each level. Nothing about the underlying changed. The option itself didn’t get riskier. The willingness to hold it through a long weekend did.
A market order that would’ve been a clean fill on a normal Tuesday can walk through two or three price levels before it’s done, and the fill you get back looks nothing like the mid-price you were staring at when you clicked. That’s not bad luck. That’s the mechanic working exactly as designed — it’s just designed around the market maker’s risk, not yours.
What I actually do differently
I don’t stop trading around holidays. I just stop using market orders on anything less liquid than the biggest names, and I size down going into any session that borders a holiday on either side — the day before and the day after both carry it, since dealers are still cautious digesting whatever built up over the closed days. Limit orders cost you fills sometimes. That’s a fair trade for not handing a market maker a free few dollars a contract because you wanted speed instead of price.
The other thing I do is just expect it. A wide quote the day before a holiday isn’t a broken market or a broken broker. It’s dealers being honest about what they’re willing to risk over a weekend they can’t trade through. Trading around that instead of against it is the whole difference.
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