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I've seen that some option chains have very many strike choices, while some have very few.

I presume when options first become available for a particular underlying security, strike choices will be limited, and as interest/liquidity accumulates, more strikes will be added. Is that right?

If so, when and by what rules/criteria are new strikes added?

2

In general, stocks between $5 and $25 will have strikes 2-1/2 points apart, 5 points apart when the stock is between $25 and $200, and 10 points when the strike price is over $200. More liquid stocks, particularly those that offer weekly options, can have strikes as small as 1/2 to 1 point apart.

As the stock moves in one direction, its distance from the furthest strike will increase on one side and decrease on the other. The exchanges tend to add more strikes on the smaller side when this occurs. This is a price driven not a liquidity driven event. IOW, they're not going to add further OTM strikes just because the Open Interest of current strikes is increasing with price relatively unchanged.

There's no hard and fast rule. However, you can contact the CBOE and request that they add new strikes (see their web site). They will accommodate you if your request is reasonable. I have done this a number of times, particularly in stocks with lower option liquidity when my current strike has no same or adjacent strike for a later week. For example, I own the 18-1/2 put (or call) and there is no 18-1/2 strike for the next few weeks until the next standard monthly expiration. call them and receive next day service :->)

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