NYSE penny pilot program rolled out 75 new names today (NYSE)
For those who actively trade options on an intra day bases or swing you will be happy to know the cost of buying an option has in theory been reduced today(in 75 stocks). The NYSE arca penny pilot program has been running for a little over year now with a slower than expect roll out. The tightening of option spreads from a nickel to a penny is the primary purpose of the program. So how does this program make trading options cheaper? Well, in theory a nickel wide option you have to pay the spread no matter what, usually .05-.15 on average. Now the spread “in theory” will be a penny wide, though most still price in a spread of .07 or so. Thus when entering a position you can essentially put in an price you like all the way up to a penny away from the ask, or vise versa. What makes this program interesting in my opinion is not the reduced cost of entry, it’s the fact options now price and trade in a more fluid and predictable manner than in nickels. There are now greater opportunities to exploit inefficiencies in pricing because you can see where everyone sits in the book and at what price. This makes for great scalping.
OFFICAL NYSE releases on the program: