Option Pricing Increment Question

[boilermaker75]

Writing OSTK options on Schwab has to be in increments of $0.05 while on IB you can do it in increments of $0.01. I assume that means the pricing increment is up to the broker?

Edited April 28, 2023 by boilermaker75

[LC]

Not sure as I write options on IBKR. Selling calls?

[boilermaker75]

I have been selling puts, and then selling calls when I have been put to. I have only been doing this with OSTK for a little over a month but it has been working well so far.

[aws]

The increment depends on the stock, not the broker. Some stocks have options tradable in penny increments up to $3 and nickel increments thereafter, others start at a nickel up to $3 and a dime over $3.

 

It looks like the penny increment options are part of a trial program.

 

https://www.sec.gov/rules/sro/nasdaq/2020/34-89167-ex5.pdf

Edited April 29, 2023 by aws

[boilermaker75]

29 minutes ago, aws said:

The increment depends on the stock, not the broker. Some stocks have options tradable in penny increments up to $3 and nickel increments thereafter, others start at a nickel up to $3 and a dime over $3.

 

It looks like the penny increment options are part of a trial program.

 

https://www.sec.gov/rules/sro/nasdaq/2020/34-89167-ex5.pdf

 

That is what I thought. But for OSTK options I can only trade in 5 cent increments at Schwab while at IB I can trade in 1 cent increments. I know because I have done several trades with both brokers.

[rkbabang]

On Fidelity I can place a limit order only in $0.05 increments, but it is sometimes filled at a better price not divisible by $0.05

 

[boilermaker75]

9 hours ago, rkbabang said:

On Fidelity I can place a limit order only in $0.05 increments, but it is sometimes filled at a better price not divisible by $0.05

 

 

It must be something Scwhab and Fidelity are imposing for some reason but the options actually trade in $0.01 increments because I too sometimes get filled at Schwab at other than something divisible by $0.05.

[rkbabang]

On 4/30/2023 at 7:40 AM, boilermaker75 said:

 

It must be something Scwhab and Fidelity are imposing for some reason but the options actually trade in $0.01 increments because I too sometimes get filled at Schwab at other than something divisible by $0.05.

 

That is what I assumed as well, that it was a Fidelity imposed limitation.  It doesn't bother me much though because the price I get is often a few cents cheaper than my limit and the way I use options a few cents in one direction or the other doesn't matter much.  I tend to buy long dated out of the money options.  If a few cents mattered then I was wrong on my thesis for buying them.