Buying Long Term Options on Zerodha

Hi. I understand you can’t hold naked long option positions overnight outside of a specific range. I agree with Zerodha’s position that holding options overnight is very risky and responsible for most of retail losing money.

I propose a slight change in these rules though:
Allow overnight long option positions for NEXT month expiry provided atleast 10 days remain in current monthly expiry.

For eg: for a trader intending to go long Nifty puts, allow buying all strikes in the MARCH, APRIL, JUNE (and so on) monthly expiry until 10th Feb. Post 10th Feb, block MARCH and allow the rest.

[An even safer alternative - only allow this in quarterly expiry]

Long term options have limited theta decay risk. By only allowing next month expiry option buying (with ‘n’ days to current expiry), overnight risk is massively reduced. These options then become similar to a small/micro cap stock in terms of risk. I see no reason that I can buy a micro cap stock such as SUZLON, RELINFRA, or RPOWER (after mustering up courage to ignore the Nudge) and not a long term OTM option.

Currently, us traders concerned about tail risk have no means to buy long term OTM options. ATM or CTM options in far off expiries can be expensive when tail risk doesn’t materialise.

I hope we can reach some consensus around this issue.


Tagging @nithin