How Equity Option Exchanges Set Strike Intervals and Add Series
Summary
The document describes how strike spacing and the availability of listed equity option series are governed by exchange rules rather than by a single formula chosen by each broker. It gives Cboe examples of standard intervals that vary with the stock price, along with special programs that permit narrower spacing for selected stocks. It also explains that exchanges initially list strikes around the underlying price and may add series when the stock moves beyond the listed range.
The rules cited include exceptions, eligibility limits, and adjustments for corporate actions such as splits and recapitalizations. The document also notes that participants may request new strikes, though requests are not guaranteed. These details answer the general question with exchange-specific examples; they should not be treated as universal rules across all options venues or as a complete account of current listing policies.
Key ideas
- Equity option strike intervals can vary with the underlying share price.
- Exchange listing programs may allow narrower strike spacing for selected stocks.
- Exchanges can add new option series when the underlying moves beyond the available strike range.
- Corporate actions can lead to strike adjustments.
- Exchange rules and programs differ, so the examples do not establish a universal standard.
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# How is the difference between strike prices in an options chain determined? # How is the difference between strike prices in an options chain determined? I have been unable to find a formula, or any mention for that matter, of how the differences between successive strikes prices in an options chain are determined. It seems clear that the difference would depend upon the price of the underlying, but I would like to know if there is a standard way that this is determined, or whether each broker "rolls there own". Also, as the price of the underlying changes over time, how or when is this difference changed? ## Answer by Dimitri Vulis (score 1, accepted) https://quant.stackexchange.com/a/58715 Assuming we just mean equity optionson CBOE: According to http://www.cboe.com/products/options-on-single-stocks-and-exchange-traded-products/options-on-single-stocks/equity-options-specs > Strike Price Intervals: Generally, 2 1/2 points when the strike price is between \$5 and \$25, 5 points when the strike price is between \$25 and \$200, and 10 points when the strike price is over \$200. Strikes are adjusted for splits, re-capitalizations, etc. > Strike (Exercise) Prices: > In-, at- and out-of-the-money strike prices are initially listed. New series are generally added when the underlying trades through the highest or lowest strike price available. According to http://www.cboe.com/trading-resources/new-listings-series/1-and-2-5-strike-price-programs > \$1 Strike Price Program: > Cboe may select up to 150 individual stocks on which option series may be listed at $1 or greater strike price intervals where the strike price is less than \$50. Additionally, if the price of the underlying stock is equal to or less than \$20, series with an exercise price up to 100% above and 100% below the price of the underlying stock may be listed. If the price of the underlying stock is greater than \$20, series with an exercise price up to 50% above and 50% below the price of the underlying stock (up to \$50) may be listed. > \$2.50 Strike Price Program: > Cboe may select up to 60 individual stocks on which option series may be listed at \$2.50 strike price intervals where the strike price is greater than \$25 but less than \$50. Additionally, Cboe may list $2.50 strike prices between \$50 and \$100, provided the \$2.50 strike prices between \$50 and \$100 are no more than \$10 from the closing price of the underlying stock in its primary market on the preceding day. Finally, according to http://www.cboe.com/aboutcboe/new-strike-price-requests > Please list new strikes for a certain company. > If you'd like to request new strike prices for an option that trades at Cboe, please call our Strike Price Request line, at 1-877-THE-CBOE, and select choice 4 from the main menu. Please understand that not all requests can be accommodated.
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