Do Penny Stocks Have Options? Explained

Do Penny Stocks Have Options?

Do penny stocks have options? Short answer: in some cases yes, but in most cases no — options exist only for penny stocks that meet exchange, liquidity, and market‑maker interest thresholds. If a penny stock lacks a listed options market, traders must consider alternatives (ETF options, CFDs, margin) or accept thin and illiquid option series with wide spreads and execution risk.

This article explains what penny stocks and options are, how option availability is determined, market mechanics and regulation, where to check availability, the risks of trading options on low‑priced names, common strategies and adjustments, alternatives, broker rules, real‑world examples, and quick FAQs. You will learn practical checks to perform before trading and when to use Bitget tools for execution and custody.

Note on timeliness: As of January 2026, according to Barchart, some early‑stage biotech companies that trade at low prices — often called penny stocks — can show heightened volatility and event‑driven moves, but options availability depends on market structure and liquidity rather than price alone.

Definitions and background

What is a penny stock?

A penny stock commonly refers to a share that trades at a low nominal price. In the United States, regulators and many market participants often use the SEC convention of under $5 per share as a working definition. Penny stocks are frequently small‑cap or micro‑cap companies and may trade on alternative venues such as over‑the‑counter quotation services rather than on major national exchanges.

Typical venues for low‑priced equities include smaller exchange listings and OTC marketplaces. These names tend to have lower market capitalization, limited daily trading volume, sporadic news coverage, and higher bid–ask spreads in the cash market. The combination of low liquidity and limited disclosure contributes to higher risk: price moves can be large, orders can move the market, and information is often sparse.

Penny stocks are common in sectors like early‑stage biotech, small technology companies, mining juniors, and a range of microcap businesses pursuing early commercialization. A news example: as of January 2026, Barchart reports that BioXcel Therapeutics (a biotech with a late‑stage pipeline) is a small cap that has attracted attention for regulatory milestones despite limited revenue to date. Such companies can be volatile, and whether they have options depends on liquidity and listing criteria rather than their sector.

What are options?

Options are exchange‑listed derivative contracts that give the buyer the right, but not the obligation, to buy (call) or sell (put) a specified number of underlying shares at a predetermined strike price on or before a certain expiration date. Standard U.S. equity options typically represent 100 shares of the underlying per contract.

An option chain lists available expirations and strike prices for a given equity. Each series (a strike/expiration combination) will show bid/ask quotes, last trade, volume for the day, and open interest (the total outstanding contracts). Option prices reflect expectations about future stock moves, time value, and implied volatility.

Options are cleared centrally to reduce counterparty risk, and market‑makers supply liquidity by quoting both bids and offers. For an option market to exist, exchanges and market participants must see enough demand and underlying liquidity to support fair pricing and reasonable execution.

How option availability is determined for a given stock

Exchange listing and eligibility requirements

Exchanges and the Options Clearing Corporation (OCC) set standards for listing a new option class on an underlying security. Many true penny stocks trade off‑exchange or on less regulated quotation systems; those venues do not automatically yield a listed options market. To list options on an equity, exchanges require the issuer to meet criteria that often include minimum share price history, number of round‑lot holders, and minimum market capitalization.

If a company is not listed on a national exchange or does not meet the exchange and OCC criteria, exchanges typically will not open a listed options market for that ticker. Even if the issuer is listed, exchanges consider whether a sufficient number of market‑makers and floor or electronic participants will quote the option series.

Liquidity, volume and open interest thresholds

Practical thresholds matter. For option series to be viable, market‑makers must be willing to quote spreads and dealers must be able to hedge their positions in the underlying security. Key underwriting liquidity metrics include:

• Average daily share volume of the underlying stock
• Dollar volume (share price × share volume) to show overall market capacity
• Number of market participants and availability of market‑makers
• Existing open interest and trading volume in related option series (if any)

If a stock trades only a few thousand shares per day or has very low dollar volume, supporting an options market becomes difficult because generalized hedging and rebalancing would move the underlying price materially.

Price‑range and practical cutoffs

There are no absolute universal cutoffs publicized for every case, but empirically stocks trading in the low single digits — roughly $1–$5 — are more likely to have associated option series when they also have steady volume and market interest. Stocks under $1 are rarely supported with listed options because the economics of quoting and hedging option exposures become unfavorable and potential contract deltas and hedging ratios become awkward for market‑making.

In short: do penny stocks have options? Some do — particularly those that trade in the upper end of the “penny” range and that show stable liquidity — but most sub‑dollar names do not.

Market mechanics and regulatory context

Role of exchanges, OCC and market‑makers

Exchanges decide whether to list an option class on an underlying security and which strikes and expirations to offer. The Options Clearing Corporation (OCC) serves as the central counterparty and clearinghouse, guaranteeing the performance of option contracts once issued.

Market‑makers and liquidity providers play a central role: they stand ready to quote bids and offers in option series. Their willingness depends on the ability to hedge in the cash market without taking large directional risks. If market‑makers cannot hedge reliably because the underlying is too thinly traded, they will either decline to quote or will post very wide spreads, reducing the attractiveness of the option market.

Penny Interval (Penny Pilot) and tick increments

Options historically traded in nickel or dime increments, but the Penny Interval Program allows certain option series to trade in one‑cent increments for many strikes. Trading in penny increments can tighten spreads and reduce execution costs for smaller option positions. The program generally applies to option classes that meet certain volume and market quality standards.

For lower‑priced option contracts or options on lower‑priced underlying stocks, trading in penny increments can meaningfully reduce friction. But even with penny increments, series on thinly traded penny stocks can still show limited depth, wide implicit spreads, and execution difficulty.

Where to check if a penny stock has options

Using broker platforms and option chains

The most direct way to answer do penny stocks have options for a specific ticker is to consult a broker or market data provider's option chain for that symbol. A broker’s option chain displays available expirations, strike prices, bid–ask quotes, volume, and open interest. If no option chain appears for the ticker, a listed market likely does not exist.

When you use a broker platform (for example, Bitget or other regulated brokers), look for:

• A populated option chain with multiple expirations and strikes
• Reasonable bid–ask spreads across strikes you care about
• Daily option volume and open interest that indicate tradability

If the chain is thin (zero open interest, zero volume, or very wide spreads), the option series may exist technically but be impractical to trade.

Screening criteria to look for

Before trading, screen the underlying and option series for these metrics:

• Average daily share volume and average dollar volume of the stock
• Number of outstanding shares and float (more float generally supports liquidity)
• Recent cash market spreads for the stock (narrower spreads indicate better hedging capacity)
• Option open interest and recent daily option volume for the desired strike/expiration
• Bid–ask spreads and the difference between implied volatility levels across strikes

If these values are small or inconsistent, the option series may exhibit fills with large slippage or fail to execute on market orders.

Risks of trading options on penny stocks

Illiquidity and wide bid‑ask spreads

Thinly traded option series tend to have wide bid–ask spreads. That means entering and exiting positions can be costly. A trader may find that a profitable theoretical move in the underlying still yields no realized gain because the option cannot be sold at a sensible price.

Because options represent leverage, illiquidity magnifies both gains and losses. Fill prices can be far from quoted midpoints, and market orders can suffer severe slippage.

High implied volatility and mispricing

Options on small, event‑driven stocks often carry very high implied volatility. That increases premium costs for buyers and can cause erratic IV swings unrelated to the small moves in the underlying. With limited participation, theoretical pricing models may be unreliable, and the bid/ask can diverge from any model price for extended periods.

High implied volatility raises the chance that a premium paid for an option decays without the underlying moving enough, or that the option behaves unpredictably around news events.

Execution and settlement issues

Practical problems include difficulty filling limit orders: quoted liquidity may vanish as soon as a market participant tries to trade. Settlement and assignment risk for short positions can be amplified if market‑makers or hedgers cannot obtain or lend the underlying shares efficiently. Brokers may also impose restrictions or higher margin requirements for option positions on risky, illiquid underlyings.

Common strategies and how they differ from options on larger‑cap stocks

Typical strategies traders use

Traders use many familiar option strategies on low‑priced stocks, but with key caveats:

• Buying calls to obtain leveraged exposure to a potential upside move
• Buying puts for downside protection or speculative bearish bets
• Selling covered calls if you already own the underlying shares to generate income
• Using spreads (verticals, calendar spreads) to limit premium paid and reduce the effect of implied volatility

Each strategy works in principle, but the execution risks differ from large‑cap environments because spreads and fills can dominate outcomes.

Adaptations and risk controls

Practical adaptations include:

• Using smaller position sizes to limit exposure to poor fills
• Preferring limit orders and avoiding market orders
• Selecting option strikes and expirations with visible open interest and daily volume
• Considering defined‑risk spread strategies to cap potential losses
• Monitoring order book depth and watching for sudden changes in liquidity before entering

Because options can be thin, many traders treat them as event‑driven plays (earnings, FDA decisions, licensing news) and size positions conservatively around such events.

Alternatives when options are not available or practical

Options on small‑cap or sector ETFs

When a specific penny stock lacks options or those option series are impractical, using options on small‑cap ETFs can provide exposure to a related sector or size segment with much better liquidity and standardized contracts. ETF options typically have deep markets, transparent pricing, and consistent liquidity, making them useful hedging or speculative tools when single‑name options are not viable.

If you need exposure to biotech or small‑cap moves but cannot trade options on a particular low‑priced name, consider an ETF focused on that sector or capitalization and trade its options as a proxy.

CFDs, derivative products and margin trading

Some regulated brokers offer contract‑for‑difference (CFD) products or margin trading that provide leveraged exposure to low‑priced names without options. These instruments carry their own counterparty and regulatory risk, and margin can amplify losses. Use caution and understand the broker’s terms.

Bitget provides a range of derivatives and a custody solution through Bitget Wallet; when considering alternative products, compare fees, execution quality, regulatory safeguards, and liquidation mechanics.

Brokerage policies and practical considerations

Broker restrictions and commissions

Different brokers have varying policies for penny and OTC securities. Some brokers restrict trading in OTC/penny names, require special approvals for options trading on small‑cap stocks, or limit option series availability. Commissions and per‑contract fees also differ and can make small option trades uneconomical.

Check the broker’s margin requirements, assignment policies, and whether the platform supports option series on the ticker in question. If you plan to exercise options, confirm the broker’s rules for exercising and settlement.

At Bitget, confirm product availability and requirements for options or derivative trading on specific tickers and review custody options via Bitget Wallet.

Order types, position sizing and risk management

Best practices include:

• Using limit orders and being explicit about acceptable fills
• Keeping position sizes small relative to overall capital
• Setting stop‑losses or exit plans before entering trades
• Reviewing option open interest and spread behavior before initiating
• Avoiding complex multi‑leg strategies unless each leg is liquid enough to execute independently

Risk management is essential: the leverage in options means a small adverse move can lead to a total loss of premium, and illiquidity can prevent timely exits.

Historical and real‑world examples

Examples of low‑priced stocks with option markets

Some low single‑digit stocks develop active option markets when trading volume and investor interest justify it. For example, small biotech firms approaching regulatory milestones can see a surge in both equity volume and demand for option exposure; if this demand is persistent and the stock meets exchange criteria, options can be listed and become tradable.

However, many sub‑dollar micro‑cap names never obtain option markets. Traders interested in option exposure often focus on the upper end of penny ranges or use ETF alternatives.

Case studies and lessons

Event‑driven cases highlight two lessons: options can amplify returns when liquidity and pricing are healthy, but they can also magnify losses and execution risk when series are thin. News‑driven spikes in underlying price may be accompanied by erratic option quotes; sometimes options trade at seemingly irrational prices because market‑makers struggle to hedge or because supply/demand is one‑sided.

A neutral takeaway: verify liquidity metrics and prefer trades where both the underlying and the option series have visible activity.

Frequently asked questions (FAQ)

Q: Can I trade options on any penny stock?

A: No. Do penny stocks have options? Only some penny stocks do. Options exist when an exchange lists option classes for the ticker and market‑makers are willing to quote series. Many penny names, especially sub‑dollar OTC stocks, do not have listed options.

Q: Why are option premiums so high on penny stocks?

A: High implied volatility, low liquidity, and wide spreads drive up quoted premiums. When dealers face hedging risk and limited ability to trade the underlying, they demand higher premiums to compensate for that risk.

Q: What should I check before trading options on a penny stock?

A: Check average daily share volume, dollar volume, option open interest and daily option volume, bid–ask spreads in both the stock and option series, and broker restrictions. Use limit orders and size positions conservatively.

Q: What are safer alternatives if a penny stock has no practical options market?

A: Consider options on a relevant small‑cap or sector ETF, CFDs or margin products through regulated brokers if appropriate, or simply reduce leverage and trade the underlying stock with cautious position sizing. Bitget offers derivatives and custody options to explore safer liquidity choices.

References and further reading

• Investopedia — guides on penny stocks and options (search for penny stock definition and options basics).
• Options education materials from major market authorities (on option clearing and Penny Pilot Program descriptions).
• PennyStocks.com — articles on trading options with penny stocks and liquidity concerns.
• Fortrade, Saxo and SoFi explainers on penny stocks and market mechanics (for general background).
• Barchart — market coverage and company news. As of January 2026, Barchart reported on BioXcel Therapeutics' pipeline progress and market attention.

Sources cited in this article provide background and practical guidance; check exchange rules, OCC notices, and your broker’s documentation for the most current policies.

Final notes and next steps

Do penny stocks have options? The practical answer depends on liquidity and listing criteria. If you find options for a low‑priced ticker, evaluate open interest, daily option volume, and bid–ask behavior before trading. If no options exist or the option series are thin, consider ETF options, regulated CFDs, or conservative cash trading instead.

To explore tradable derivatives and custody options tailored for smaller‑cap exposures, review Bitget’s product offerings and Bitget Wallet for secure custody. Use demo accounts or paper trading when testing strategies to understand execution realities without real capital at risk.

Want to check a specific ticker? Use Bitget’s market tools and option chain viewer to see whether options are available and to inspect daily volume, open interest, and quoted spreads before placing orders.

Article prepared with neutral, factual information. Not investment advice. Verify facts with primary sources and your broker.