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.
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 $4.90...
That put is in the money, and it has a huge bid 0.43/ask 5.00 You could never sell it for more than 2$ but you are welcome to buy it.
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?