Limit Price / Bid – options
Quick question – hoping somebody can ELI5.
I often see Last, Bid, or Ask prices on options for $.01. I think great opportunity to avg down!
But no broker I've used will allow me to enter a limit order under $.05 or $.10 (price dependent) – giving a warning that the exchange will reject it.
How are people purchasing contracts at $.01 or entering bids at that rate?
Example: I'm currently in a long call at $.15 per contract. The option chain is clearly showing last purchase price at $.01 even though the ask has been sitting at $.75 for weeks. I have tried several times to enter a limit order at $.01 but the lowest they will let me buy at is $.05. When I did avg down prev at $.05 the last purchase price changed to $.05 …
I have accounts at Fidelity and Webull.
Confused.
Posted by dollellama44
3 Comments
This should help – [Options contracts increments by 5 cents. : r/options (reddit.com)](https://www.reddit.com/r/options/comments/12bnabs/options_contracts_increments_by_5_cents/)
Some options trade in penny increments (AAPL for example). some options trade in 5 cent increments (TSLA for example.
There are exceptions to the 5 cent rule. Common exceptions if you see a trade on 5 cent option at a different price not ending in 5 or 0 it might have been part of a multi-leg spread or it might have been a market maker permitted trade.
I trade vertical spreads frequently, and I regularly close spreads for numbers like 3.93 or 4.02. So a broker or market maker made the trade happen at something other than a 5-cent increment, even though single-leg orders are limited to that increment.