I agree it can be a big deal, a very big deal... It's just that I wanted to point out the irony of the possibility of the penny being discontinued in our society. Could you imagine that, every thing being in multiples of a nickel? How many items in the store are 99 cents? What would they be, 95 cents? Here in WI, the state sales tax is 5.6%, would they round up or down? I know the answer to that one! I don't think the penny will be eliminated anytime soon, but it is a possibility.
wilburbear, i cant help but notice your sentiments that if we cant grab the edge we shouldnt trade options or look forward to penny ticks. Having said that, do you trade options? If you do, on or off the floor?
Happens already. Look at the actual price on a gas pump some day. They add up the fractional cents and then round down.
You mean round up. Yeah, gas in multiples of a nickel, either 3.05 or 3.10 0r 3.15, with nothing in between. Everybody'd be raisin' a fuss on that.
Not talking about high volume options in liquid products. Options that now trade at a 5 cent spread WILL tighten. Those trading at 20+ cents will probably NOT, at least for any decent size. I'm no options genius, but you know that the large spreads are PART OF THE PRICE, not just there so you can drive a truck through it. Volitile thin stocks options rarely trade at fair value. Too hard to make money for the seller, so they juice the price with a fat spread. That will not go away.
Yeah, but on a market of, say, 2.00 bid, 3.00 offer, if you cleverly go 3.01 bid, a market-maker algorithm will go 3.02 bid. This can go on and on. Then if you cancel, all the market-maker bids will go back down to 3.00. That is the current state in equities. Penny pricing in options will be a disaster, unless you are buying offers or hitting bids. In those cases you are losing money as soon as you touch the market. You instantly give up theoretical value edge. Algorithms will harass you out of bids and offers that are good values. Comment to the SEC.
they'd round the TOTAL bill ... You can't very well get rid of the numerals 1,2,3,4,6,7,8,9 DUMP THE PENNY ... THEY DRIVE ME INSANE! I've got piles of them ... can't get rid of them ...
On top of that, you won't be trading against firm quotes. In other words, let's say you do want to lift an offer at 1.03 that belongs to some guy on ET, you try to go lift it and then they pull their offer. A lot of retail guys do that. Market makers make firm quotes. Meaning if they offer a market, it's yours to take. You know what you are getting. Kind of a minor hassle though because you'll be able to lift their offer at 1.05. But it will drive some of you crazy and I'm certain many on here will start threads bitching about how they can't get any fills at these prices. I also think many of you will be shocked when you discover that 80% of the options out there will have normal nickel and dime spreads. Only the most active names on the front month with the ATM options will be tighter.