Every Penny Counts

This column was originally published on RealMoney on Feb. 22 at 3:24 p.m. EST. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

The rollout of the Penny-Trading Pilot Program, which will allow options to be quoted and entered in 1-cent increments, was completed when two exchange-traded funds, the Nasdaq 100 Trust (QQQQ Quote) and Russell 2000 iShares (IWM Quote), were added last week. This rounds out the 13-name list that will constitute what is supposed to be a three-month trial period.

But the glitch-free transition and positive feedback pretty much ensure that trading options in pennies is not only here to stay, but will eventually expand to the majority of listings. The impact is already measurable, and traders are quickly taking advantage of the tighter markets.

The average daily trading volume of the equity issues -- which includes, General Electric (GE Quote), Whole Foods (WFMI Quote) and Caterpillar (CAT Quote) -- has seen a 9% increase on average since the launch. For the two ETFs, the volume increase has been about 2%, but considering that the QQQQs and IWM had averaged over 100,000 contract a day, this still a substantial increase of some 20,000 contracts. ...