LIQUID & ILLIQUID STOCK OPTIONS CONTRACT

F&O
1

There are about 200 F&O Stocks, but can somebody say which stocks are Liquid and Illiquid for options trading ?

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2

If you want liquidity, trade only in nifty and banknifty.

Stock options are fairly illiquid. Even the highly liquid scrips such as Reliance, HDFC, etc would only have fair liquidity for ATM. Slight ITM & OTM would have high sliipage.

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3

Recently did a ratio spread on ITC stock option. Super illiquid in OTM and slippage is high.
Had to cover shorts in a favorable position (which took almost 4 hours to fill) and then exit the buy position with slippage to close the position.

If you want liquidity, stick to index trading!

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4

Things to look before hand to check liquidity =>

  1. Track bid & ask spreads
  2. Time of the Last trade of the strike price

You could use the following measures to improve liquidity in equity based F&O stocks =>

  1. Only use strike prices with 0s or 5s
  2. Trade in NIFTY 50 composite of stocks
  3. Only take ATM trades
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5

Thank you

6

Thank you for the reply

7

thanks