Equity Options

Question 1

What interval does an options strike price move, in relation to the underlying security?

Answer 1

2.5%

Question 2

For stocks trading at $20 or less, what can the strike price be?

Answer 2

100% higher or lower

Question 3

For stocks trading over $20, what can the strike price be?

Answer 3

+/- 50%

Question 4

At what rate are premiums quoted?

Answer 4

Quoted in “pennies”; increments of 5 cents for contracts under $3; 10 cents for contracts > $3

Question 5

Penny Pilot Program

Answer 5

test program that allows more incremental premiums of 1 cent

Question 6

When to options contracts expire?

Answer 6

Always the 3rd Friday of the month at 11:59 EST

Question 7

When can options contracts be issued?

Answer 7

Always for the current month and one month after; also each security is assigned 1 of 3 cycles

Question 8

What are the three cycles for options contracts?

Answer 8

Cycle 1 - Jan Apr Jul Oct
Cycle 2 - Feb May Aug Nov
Cycle 3 - Mar Jun Sept Dec

Question 9

How do options contract cycles affect trading?

Answer 9

Only the next two months in the cycle are eligible for trading

Question 10

Maximum life of an equity options contract

Answer 10

technically 9 months; in practice 8 months

Question 11

Trading hours for options

Answer 11

9:30am-4:00pm EST

Question 12

Trading cut-off for options

Answer 12

3rd Friday of the expiration month

Question 13

LEAP

Answer 13

Long-term Equity AnticiPation - option with a 30 month expiration date. Issued at the end of May.