5.2.4.2. Strike Price Increments
Strike prices range above and below the initial market price of the underlying stock in prescribed increments. If the stock is trading below $25, strikes come in increments of $2.50. For stocks trading between $25 and $200, the strike price will rise and fall in $5 increments. Strike prices for stocks trading above $200 will change in increments of $10.
To enhance liquidity in any given option, certain actively traded stocks can be selected to have strike prices in $1 increments up to $20, and in $2.50 increments up to $50. In no case can the incremental change be less than $1.
Example: Suppose an exchange committee has voted to list two additional stocks on its exchange. One trades at $23.50 and the other at $41.17. The strike prices for these stocks can be expected to look like the accompanying diagram.
|
Strike Price Increments |
|
|
Stock 1 |
Stock 2 |
|
*Market price of stock |
|
|
17.50 |
30.00 |
|
20.00 |
35.00 |
|
22.50 |
40.00 |
|
23.50* |
41.17* |
|
25.00 |
45.00 |
|
27.50 | |