I can buy or sell an option for one to four cents at IB but I can’t at Firstrade, where the prices on the screen start at five cents. Does every broker get to make this decision? I thought this was mandated by the CBOE. Any answers out there?
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Options, XSP and penny increments
- Thread starter SoCalOptionsWriter
- Start date
For an option to be quoted in pennies, it must be part of the "Penny Program." This is basically based on overall volume and can change. The OCC lists what stocks are part of the program here, OCC - Penny Program (theocc.com)
Even if a stock is not part of this program, options may still trade in pennies. Some exchanges will accept a penny priced bid/offer even though it can't be displayed. Also, spreads can be entered and traded in pennies. Typically, options must be below 3 to be quoted in pennies as well. Exceptions being some instruments such as SPY. And SPX no pennies in spreads.
For XSP pennies should be allowed on all option prices. Are you saying First Trade doesn't allow?
Even if a stock is not part of this program, options may still trade in pennies. Some exchanges will accept a penny priced bid/offer even though it can't be displayed. Also, spreads can be entered and traded in pennies. Typically, options must be below 3 to be quoted in pennies as well. Exceptions being some instruments such as SPY. And SPX no pennies in spreads.
For XSP pennies should be allowed on all option prices. Are you saying First Trade doesn't allow?
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Yeah, I figured it was Firstrade’s decision. They only allow penny increments above $3 for XSP. Shame.
Wait, they only allow pennies above 3? Thats even stranger, if they did limit pennies, you would think it would be to only options below 3.Yeah, I figured it was Firstrade’s decision. They only allow penny increments above $3 for XSP. Shame.
You should definitely follow up with them. This really makes no sense. Do they restrict pennies in SPY?
Yup. Strange indeed. Am following up. Shame, too, as it is the only wrinkle I have found so far in this broker.
Just to follow up: I misspoke on the above/below $3 premium. But apparently they do exempt some products and I presume XSP is one of them. Their boilerplate below.
[The Penny Interval Program allows options for some related stocks and indexes to trade in increments of $0.01. The minimum increments for all classes in the Penny Pilot (except for QQQ, IWM and SPY) are: $0.01 for all option series with a premium below $3, and $0.05 for all option series with a premium of $3 and above.]
[The Penny Interval Program allows options for some related stocks and indexes to trade in increments of $0.01. The minimum increments for all classes in the Penny Pilot (except for QQQ, IWM and SPY) are: $0.01 for all option series with a premium below $3, and $0.05 for all option series with a premium of $3 and above.]