Penny Wide Option Pricing

Penny wide option pricing refers to stocks or ETFs where exchange traded option price move in penny increments ($0.01) not the usual five cent ($0.05) or ten cent ($0.10) increments. This means that bid/ask values for options and option spreads can be quoted in pennies, not just five or ten cent increments. For example this means that a spread can trade at a bid/ask of $1.38 / $1.46, potentially being filled at (for example) $1.42. Historically before this penny pricing, this might have had a bid/ask of $1.35 / $1.45 and got filled at $1.40.

The penny wide option pricing is usually only on the most heavily traded stocks. High volume stocks and ETFs normally have higher option open interest (number of outstanding open option contracts), so it makes sense that these should be available to trade in penny increments.

For 30 Day trading we typically stick to using only ETFs, so we took the full list of all stocks and ETFs in the penny wide option trading program – and narrowed it down to this ETF only list:

DIA EEM EFA EWJ EWT EWW EWY EWZ FXE FXI GDX GLD
IWM IYR KRE QQQ SLV SPY TLT UNG USO UUP VXX XHB
XLB XLE XLF XLI XLK XLP XLU XLV XLY XME XRT

BTW – If you are really interested this is the AMEX penny option pilot report on how it’s original rollout affected volume and pricing.

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