Tick sizes and minimum price increments in options

Tick size is the smallest permitted price movement or quoting increment for an option. It matters because spreads, negotiation room, and execution cost are all constrained by the minimum price increment allowed on the venue.

In options markets, tick sizes and minimum price increments set the smallest amount by which prices can be quoted or improved. Traders cannot quote in arbitrary fractions if the venue’s rules only allow certain increments. The article points out that this matters for liquidity because the narrowest possible spread depends partly on product and venue rules, not just on trader willingness to compete. Tick size therefore shapes how tight a market can appear, how finely a trader can improve a bid or offer, and how spread cost translates into cash. It is especially relevant when comparing products, since different options markets and contracts may use different conventions.

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• About Quotes