I've noticed that options volumes can vary dramatically between underlying securities.

What makes some stocks (e.g. AAPL, BAC) so attractive for options traders?

2 Answers 2


Option liquidity and underlying liquidity tend to go hand in hand.

According to regulation, what kinds of issues can have options even trading are restricted by volume and cost due to registration with the authorities.

Studies have shown that the introduction of option trading causes a spike in underlying trading.

Market makers and the like can provide more option liquidity if there is more underlying and option liquidity, a reflexive relationship.

The cost to provide liquidity is directly related to the cost for liquidity providers to hedge, as evidenced by the bid ask spread.

Liquidity providers in option markets prefer to hedge mostly with other options, hedging residual greeks with other assets such as the underlying, volatility, time, interest rates, etc because trading costs are lower since the two offsetting options hedge most of each other out, requiring less trading in the other assets.


The penny pilot program has a dramatic effect on increasing options liquidity. Bids can be posted at .01 penny increments instead of .05 increments. A lot of money is lost dealing with .05 increments.

Issues are added to the penny pilot program based on existing liquidity in both the stock and the options market, but the utility of the penny pilot program outweighs the discretionary liquidity judgement that the CBOE makes to list issues in that program.

The reason the CBOE doesn't list all stocks in the penny pilot program is because they believe that their data vendors cannot handle all of the market data. But they have been saying this since 2006 and storage and bandwidth technology has greatly improved since then.

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