Why are there illegal option orders in the orderbook?

E

earth_imperator

An option can never have a premium that is higher than the strike.
But with some tickers/symbols the orderbook clearly contains some Ask prices that are higher than the strike, for example strike is 2 and Ask is 5.
How come? Who can place such offers? B/c I cannot as my broker's system gives an error when trying to place such an order.

These illegal prices are also a problem for IV calculations: it wrongly increases the IV since IV usually is calculated from MidPrice between Bid and Ask...

I experience and observe such buggy option data even in broker-official "current" data received via broker-API.

Update: above I mean Put options.
 
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I don't know the MM rules (not relevant if you're not a MM) but probably they have to quote at least a certain % for a spread < 5. So therefore lots of offers at $4.90...
 
Here's a screenshot: watch the Ask of Put strike 2:

VERU_see_Ask_of_Put_strike_2.png
 
cesfx said:
That put is in the money, and it has a huge bid 0.43/ask 5.00

You could never sell it for more than 2$ but you are welcome to buy it.
More...

The question is about how and why the $5 was accepted into the orderbook.
Who is allowed to place such a sell order with a price above the Put strike?
Why does the marketplace accept & tolerate such clearly fraudulent orders?
 
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