An exchange scheme letting selected option classes quote in $0.01 steps instead of $0.05 or $0.10, tightening spreads on the most liquid names.
Not every option quotes in pennies. Classes in the program may quote in cents below a threshold price and in nickels above it; everything else quotes in nickels and dimes. This is set by the exchange, not by the broker.
It is a direct cost input. A class stuck on nickel increments has a minimum possible bid-ask-spread five times wider than a penny name, which changes whether a high-frequency strategy such as gamma-scalping can pay for itself at all.
Example: a penny-quoted option shows 1.24 / 1.25, a one-cent spread costing $1 per contract to cross. A nickel-quoted option shows 1.20 / 1.25, costing $5. A strategy that round-trips 200 contracts a month pays $200 in one and $1,000 in the other.
Original diagrams for the ideas on this page. Illustrative, not real market data.
The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.
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