# Option Tick Sizes: Why Your Order Is Hidden

> Why your limit order never appears in the NBBO: how option tick sizes work, what penny pilot classes change, and what you can do about it.

Source: https://www.marketdata.app/education/options/option-tick-sizes/

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-   [Options Education](/topics/education/options/)

# Option Tick Sizes Explained: Why Your Order Doesn’t Show Up in the NBBO (and How to Fix It)

Why your limit order never appears in the NBBO: how option tick sizes work, what penny pilot classes change, and what you can do about it.

-   Last updated June 11, 2025

A Market Data customer recently reached out after noticing something strange: they submitted a **limit order to sell** an option at **$3.35**, and their broker confirmed it was live and working. But when they checked Market Data’s live BBO (Best Bid and Offer) [options feed](/docs/api/options/quotes) using our API, the **ask still showed $3.40** – and their order wasn’t reflected. The issue they faced was not respecting option tick sizes.

The problem? Their order never reached an exchange’s visible order book.

And unfortunately, this isn’t just a harmless technicality – it can actually **cost you real money**.

## The Real Issue: Price Increments and Order Visibility

In the U.S. options market, exchanges enforce **minimum option tick sizes**:

-   **$0.05** increments for contracts **under $3.00**
-   **$0.10** increments for contracts **$3.00 and above** (unless the contract is part of the _Penny Pilot Program_)

In this case, the trader was working with options on **Pampa Energía (PAM)**, which is **not penny-eligible**. So the order at **$3.35** was **not a valid exchange price**. The exchanges only accept orders at $3.30, $3.40, $3.50, etc.

Even though the broker accepted the order, it wasn’t actually routed to the exchange’s visible book. And that’s where things get problematic.

## How Price Increments Work (a.k.a. Minimum Price Variation)

When you place an options order, you can’t just choose any price you want. Exchanges enforce standardized steps between allowable prices, known as **price increments**. The formal industry term for this is **Minimum Price Variation (MPV)**.

The MPV determines the smallest possible amount by which a quote can be raised or lowered. If you submit a price that doesn’t align with the allowed increment, your order may not be accepted by the exchange or displayed in the market data feed—even if it looks better than the current bid or ask.

Two factors determine which increment applies:

-   **The price of the option** – whether it’s under or above $3.00
-   **Whether the option is penny-eligible** – part of the Penny Pilot Program or not

For non-penny-eligible options, the rules are:

-   **Under $3.00**: Must use **$0.05** increments (e.g., $1.15, $1.20, $1.25)
-   **$3.00 and above**: Must use **$0.10** increments (e.g., $3.30, $3.40, $3.50)

If a trader submits a price like $3.35 for an option that only accepts $0.10 increments, the quote won’t be eligible to set the NBBO. Even if the broker accepts the order, it may not make it to the public book.

This is why understanding price increments—and how MPV rules apply—is essential for ensuring your order is visible, fillable, and protected on the exchange.

## The Hidden Risk: You’re Exposed, But Not in Control

When your order is priced between valid ticks, **it can still be routed to a market maker** – but not in a way that gives you price priority.

Here’s what can happen:

-   You submit a **sell** order at **$3.35**
-   The best visible ask is **$3.40**
-   A **market maker sees** your hidden $3.35 offer
-   The market maker **sells to the public at $3.40**
-   Then **buys from you at $3.35**, pocketing the $0.05 spread

**You’re giving the market maker free money.**

You’re not getting filled at the best possible price, and you’re not improving the public quote. You’re just subsidizing someone else’s arbitrage trade.

## How to Protect Yourself

If you’re placing orders in non-penny options, you need to **play by the tick size rules** to avoid being gamed:

-   Price at **$3.30** or **$3.40**, not in between
-   Check whether the option is penny-eligible before using tight price increments
-   Don’t assume your broker will prevent invalid prices – they let them through and you will be front-runned by a market maker (who is paying your broker for their order flow)

When you use valid ticks, your order will be:

-   **Properly routed** to the exchange
-   **Eligible to set** the public bid or ask
-   **Protected** by time and price priority

## Summary: How Price Increments Work in U.S. Options

| Program Type | Option Price | Min Increment | Valid Quote Examples | Example Tickers |
| --- | --- | --- | --- | --- |
| Non‑Penny | Under $3.00 | $0.05 | $1.25, $1.30, $1.35 | PAM, YPF, CRESY |
| $3.00 and Over | $0.10 | $3.30, $3.40, $3.50 |  |  |
| Penny (Standard) | Under $3.00 | $0.01 | $1.23, $1.24, $1.25 | AAPL, AMD, MSFT |
| $3.00 and Over | $0.05 | $3.30, $3.35, $3.40 |  |  |
| Ultra‑Liquid ETFs | All prices | $0.01 | $3.01, $3.02, $3.03 $10.01, $10.02, $10.03 | SPY, QQQ, IWM |

_Note:_ Ultra‑liquid ETFs like SPY, QQQ, and IWM quote in $0.01 increments at all prices. Most tickers in the Penny Program revert to $0.05 increments above $3. Non‑Penny Program tickers follow the stricter $0.05 / $0.10 rules.

## Final Takeaway

When you’re trading options that **aren’t part of the Penny Pilot Program**, using invalid price increments doesn’t just prevent your order from improving the quote – it can **expose you to being front-run** by liquidity providers who see your order but know it can’t post publicly.

To avoid handing over free money to market makers:

-   **Stick to valid tick sizes**
-   **Check penny eligibility**
-   **Use our real-time market data feed** to monitor true NBBO conditions