2

In options trading, the lowest price for one call option can be as low as $0.01, for example for one contract which expires in a year.

My question is what is the maximum number of options I can buy for that kind of option contract? Can I buy 20000 of them at once if there is an asking price? I assume if there is an ask price, market maker will sell those options for $0.01.

  • Sure, why not? But why do you want to buy so many? Unless you are good at predicting black swan events. – Victor123 May 12 '15 at 0:36
  • @Victor123 or you're hedging a similarly large position or want to leverage a small potential price change into a large profit. Please no one do the latter unless they REALLY know what they are doing! – MD-Tech May 12 '15 at 9:06
  • right. i agree. If u bought one $0.01 70-put options of oil at 2014 July which expires at 2014 Dec. ur options should've worth $12 at Dec 2014 when oil was around $50........... – Dude from SF May 12 '15 at 23:16
  • Commodity expiration is different than stock expiration. (not just the date) – Optionparty May 14 '15 at 2:07
2

Options trading at $.01 have the same position limits as other options. Self regulatory organizations set the position limits for options which can be 250,000 contracts on one side of the book, as an example.

Weeklies that are expiring soon have lots of liquidity while trading at $0.01, you can see this in Bank of America stock if interested

  • 1
    Warning: if you don't know what you're doing options can be a good way to lose a lot of money very quickly. – keshlam May 11 '15 at 23:20
  • if the option is not liquid enough, is market maker still willing to sell u 20,000 contracts and each worth $0.01 even if there exists a ask price? – Dude from SF May 12 '15 at 23:18
  • @user1968962 even if the option is not USUALLY liquid, a market maker may be still willing to fill you in volume at $.01 if that already is the ask price. There is no guarantee you will get executed or that a market will develop for the size of the trades you want – CQM May 13 '15 at 0:20

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.