Lower circuit for deep OTM options

Trading
1

I am trying to understand Lower Circuit limitation for deep OTM options.

Check the 2 screenshots (NIFTY spot is at ~17370 when I took these screenshots on 18 Feb, Friday, 12:45 pm).

Screen Shot 2022-02-18 at 12.48.28 PM
Screen Shot 2022-02-18 at 12.52.01 PM

For both PE/CE ATM strike (17300), I see lower circuit value as 0.05 (CMP: 237), but for deep OTM of 15800, Lower Circuit value is 5.7 (CMP: 7.2). Please note that I am checking these values on a Friday so it’s not an expiry day.

Queries:

  1. Why a (higher) Lower Circuit Limit for deep OTMs?
  2. During trading hours, if lower circuit limit is reached for deep OTMs, will the circuit limit be revised by the exchange?
  3. If answer to 2 is yes, will the strike be frozen for trading for sometime before the revision happens? For how long will it be frozen and how will the new lower circuit limit price be calculated?

Thanks.

2

Generally, for F&O stocks the circuit is revised. I must assume it is the same for options. This circuit limit for options might be in place for reducing the freak trades at retailers end.

Circuit does not means “FROZEN” for trading. The bid ask price will be limited within the circuit range. You can still buy or sell at the circuit limit always!

3

Yeah, in point 2, I mentioned that when the circuit limit is reached, then what happens? Is there a temporary freeze on trading in the strike?

Regarding freak trade, I could not understand consistency in protection the exchange is trying to provide (if any). I see 18200 CE strike showing lower circuit of 0.05 but 15800 PE strike is showing Rs 5.7 lower circuit for NIFFTY spot at 17300.