Series 7: 5.2.4.2 Strike Price Increments

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.