$1.00 and $2.00 strike equity options

Discussion in 'Options' started by m22au, Mar 23, 2009.

  1. m22au



    Does anyone know when this started?

    Is there any criteria for which stocks have strike prices below $2.50 ?

    eg. FRE and FNM are trading below $1 today (and below AIG), but they only go as low as $3.00
  2. When they began issuing strikes that are one point apart, they established $3 as the minimum. Not sure when it started, but it's been a few years.

    The 2.50 strikes are 'regular' option series that includes $5 and $7.50 strikes.

  3. m22au


    I am aware of $3 strike prices, my question relates specifically to the $1 and $2 strike prices.

    I first noticed these today - were they in existence last week?

    Also, what is the criteria for a stock to have options with strike prices below $2.50? AIG and C have them, but FRE, FNM and F do not.

  4. SForce


    No idea but I noticed them later last week on something or another. Today I noticed them on AIG/C/GM maybe something else too. Later in the day they popped up on XLF.
  5. I had also heard or thought strikes only went to 2.50 or 3.00. It honestly doesn't surprise me they would add $1 and $2 strikes however - why not take advantage when you know there will be volume?

    And I just looked at AIG and there was decent volume there for those strikes. Personally, I don't see any reason for the exchanges not to offer them as long as they will be used.

  6. At one time options were for 'real' companies only, and there were strict listing requirements.

    I know the exchanges want to make money, so I assume they simply ignore the rules.

  7. Mark, I understand what you are saying. I just like to have more options (no pun intended) available.

    Also, remember that AIG is still valuing out as about a $4 billion market cap company.

    I don't currently have any interest in playing AIG either bullish or bearish, but if I did, better to have 1 and 2 strike options available then not to have.

    One more thing - if AIG simply did a 10-1 reverse split, now they would be about a $15 stock, a $4 billion market cap still and everyone would assume they would likely have 10 and 20 strikes.