Impact Cost (Slippage)
Also called: impact cost, slippage, execution cost, spread cost, market impact.
How it is read
Impact is read together with the explicit charges, because the two behave differently. Statutory charges scale with the value traded, and are the same everywhere. Impact depends on three things: the instrument's liquidity, the size of the order, and the moment it is placed. So it is large exactly where the book is thin. That means far strikes, small names, and the minutes around an event. On a small intended move it can exceed every explicit charge combined.
What it does not tell you
Impact cost is not a published figure. It cannot be looked up in advance. The exchange's own impact-cost statistic is measured for a standard order size. It will understate a larger one. It also varies through the day. A figure measured once does not describe every fill. Any expectancy or break-even calculation that omits it is optimistic by an unknown amount.
See it in an experiment
Market X-Ray: Bid/Ask and Slippage — Walk an example order through bid/ask levels and inspect spread, partial fills and slippage.
Related concepts
Market, Limit and Stop Orders: What Each One Controls
A market order takes what is available, a limit order sets a boundary, a stop order starts a second order. What each one controls, and what none of them promises.
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