Replies to post #34750 on Zion Oil & Gas Inc (ZNOG)

[NO OIL NO GAS 0 CASH]

Decimal trading is in effect in the USA. At the time it went into effect the the minimum increment in quotes was changed from 1/16 (6.25 cents) to 5 cents. The five cent increment for all options under $3.00, and ten cent increment for all options over $3.00, remained in effect for all options until January 26,2007. At that time a small number of stocks started trading with penny increments in the bid and ask quotes. The number of stocks with penny increments has been increased since then.

So, your broker is probably correct that you need to use a limit price that is a multiple of five cents.

The reason for using a five cent increment is simply that options on some stock are very thinly traded, and the market makers have indicated they will not support trading of certain options unless the bid-ask spread is large enough to them to make a reasonable profit without a lot of volume. Some people would call that greed, but I can see the market makers' view as well. If they cannot make enough money to stay in business fewer options will be be available for trading.

All of the contracts that filled at .01¢ were contracts being closed out.

[Porgie Tirebiter]

It would make no sense to sell to open those calls, as the maximum potential profit is limited to the premium collected (a few cents) while potential loss is theoretically unlimited. Which is why brokers require most retail traders to own the underlying while the position is in place.

1¢ pricing intervals are becoming more and more common. I just tried it with TD Ameritrade and they accepted a 3¢ bid. (which I promptly canceled!)

The short time I was monitoring that call, I never saw the ask drop below 10¢. But that doesn't mean a limit order can't get filled at 5¢.