Hi, Can anyone point me to the official rules for option pricing? I am interested in what is allowed to be posted to the NBBO with penny priced options as the price moves up through the levels. Thanks.
Also, beginning on February 1, 2010, the minimum increment for all option series in IWM and SPY will be $.01 (as it currently is for the QQQQs). The minimum increments for all other classes in the Penny Pilot (except for the QQQQs, IWM and SPY) are: $0.01 for all option series below $3 (including LEAPS), and $0.05 for all option series $3 and above (including LEAPS). I think this is the latest rule. 1245
Thanks as usual 1245. Does that mean if I put in an order to sell contracts at 5.24 on a 5.15 x 5.25 bid ask that my order will not show on the NBBO?
No. It means you can't enter that order at that price unless the exchange accepts orders in that interval. Your order should get rejected. You might be using some "smart" or "managed" route where the order is held somewhere else and accepts orders at any price. You should ask your broker. Also, there are 9 option exchanges. Maybe one of them has different rules. 1245