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Penny Priced Options

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Penny priced options (PPOs) are equities derivative options that trade in penny increments, unlike the majority of options that have a spread (difference between bid and ask) of five or ten cents. They are the product of the Penny Pilot Program that was initiated in November, 2006. The primary benefit is that the round trip cost of the trade can be pared down significantly (instead of rounded up, as with other spreads on the bid and ask). These options are associated with the most heavily traded equity issues. The high trading volume on the stocks positively correlates with the high Open Interest of the related option chain. In fact, the 63 option issues represent approximately 60% of total option volume (excluding SPX).

Here is a list (from March 2008) of equities (stocks and ETFs) that offer penny priced options: A AA AAPL AIG AMD AMGN AMZN BAC BMY BSC C CAT CFC COP CSCO DELL DIA DNDN EBAY EEM EMC F FCX FLEX GE GM GS HAL HD INTC IWM JAVA JPM LEH MER MNX MO MOT MSFT NEM NYX OIH PFE QCOM QQQQ RIMM RIO SBUX SMH SNDK SPY T TGT TXN VLO VZ WFMI WM WMT XLE XLF XOM YHOO

More information:

http://www.amex.com/amextrader/sysInfo/ANTE/PennyPilotReport_11022007FINAL.pdf

http://www.cboe.org/hybrid/pennypilot.aspx

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