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1. There is no fixed minimum price. Options can be trading 0 Bid / 1/16 ASK.
On such occasions the trading floor would buy the options back for a total of
$1. This is called a "cabinet" trade and is used for tax reporting purposes.
You would want to discuss specifics of cabinets with your broker.
The auto execution system vary from exchange to exchange and there are now 5
exchanges with opening of the ISE. At CBOE the rule is 20 X 20 when the options
are $10 or less and NOT in a fast market. Again however, you want to ask your
broker where they route your order. CBOE could be 20 X 20 and your order could
be routed to the ISE where the rule is 5 X 5.
Good luck,
CalaxCorp@xxxxxxx wrote:
> Dear RTs:
>
> I have some questions on options trading, please.
>
> 1. Are there exchange rules stating that the minimum price for an option
> has to be 1/16 per share once it is listed in the option chain, or something
> like that ??
>
> 2. If so, does that mean I can always sell my option to the market makers
> for at least 1/16 before expiration, and they are obligated to buy ??
>
> 3. Must the market makers take my order for up to 20 contracts each time if
> I am buying from them at the current Ask, or selling to them at the current
> Bid, limit orders ?? If not, how can I make sure that my orders would get
> filled without using market orders ??
>
> Thank you in advance for any help you can give me.
>
> Bill...
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