Fed up with Illiquid Options

India has the biggest FNO market by volume then why is it that besides NIFTY and BANKNIFTY there is basically no liquidity for OTM/ITM options. Either there is zero liquidity or very very wide spreads. It is getting almost impossible to rollover my short call positions as the strikes have gotten slightly in the money

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This is something I too noticed. Compared to US Stocks, the options liquidity for Indian stocks seems to be seriously lacking.

Do you know a short call has an equivalent which is much more liquid than the itm call?

You simply sell the future and also the put of same strike as the original call.

E.g to rollover reliance 2700 CE, you sell reliance future and reliance 2700 PE which is quite liquid. Both setups are equivalent in terms of movement of profit or loss.

Hope it helps.

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yeah that’s what I have done but it takes more brokerage and margin.

We don’t have market makers like in the US.

IMHO: We have a long way to go. So we shouldn’t really involve ourselves in chest thumping right now.

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Brokerage: 20 Rs. more
Margin: almost similar in both cases

But the benefit you get is in better impact cost. As both Futures and OTM options are liquid. Also, what I usually do is to sell far away Future (e.g. Reliance August FUT) and June Puts. Most likely the puts will expire worthless and you can cover up for 0.05 Rs. on expiry day. Since you don’t need to re-sell the futures part, you actually save some brokerage as well.