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As @babelproofreader mentioned, I recently blogged about the Roll model (see the original paper), which provides a very simple method for inferring the bid/ask spread based on trade prices. In short, you can estimate the cost using using the covariance: $c = \sqrt{\gamma_1}$. Where $\gamma_1$ is the $Cov(r_t, r_{t-1})$. (The R code is provided in my post). ...


2

You are referring to the Penny Pilot Program. Only options whose premiums are quoted at a price less than \$3 may be eligible for penny increments, except for IWM, QQQ, and SPY, which are always quoted in pennies. The list of permitted classes doesn't seem to come from specific volume criteria. Instead, the SEC and the exchanges together roll-out names in ...



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