Standardized options trade on exchanges through a dual auction process similar to that for listed stocks. All standardized options are known as listed options. However, large institutions may trade specialized options OTC. The terms and conditions of the contract may be negotiated with the OTC option dealer. Listed options trade on the following exchanges:

  • CBOE
  • NYSE Amex

While the NYSE is the premier exchange for listed stocks, the Chicago Board Option Exchange is the premier exchange for listed options. The directors of the exchanges that trade options determine which options to trade based on public interest in the underlying security and set the expiration cycle and strike prices for the options that trade on their floors. The exchanges generally set the strike prices for most stocks and ETFs in $1 intervals options for higher priced stocks can be set in $5 or $10 intervals.

If any option fails to meet the exchange’s listing requirements, no new option series for that underlying security will be opened for trading by the exchange unless the option receives an exception from the exchange. If no exception is received, existing option series for the underlying security will continue to trade until the last series of options expires.


A customer must be notified prior to executing a transaction in an existing series of options that will be delisted.

The option exchanges have also set maximum limits on the spread between the bid and ask for option contracts that trade on their floors. The maximum spread depends on the price of the option contract and are currently set as follows for options with the bid prices of:

  • Less than $2, a maximum spread of 25 cents
  • Greater or equal to $2 but less than $5, a maximum spread of 40 cents
  • Greater or equal to $5 but less than $10, a maximum spread of 50 cents
  • Greater or equal to $10 but less than $20, a maximum spread of 80 cents
  • Greater than $20, a maximum spread of $1

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The Chicago Board Option Exchange

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