Hi
I usually trade in Nifty. I want to start trading Crudeoil options. However, I get scared looking at the illiquidity.
My fear is this:
I but a put for intraday but unable to square it off because no one buys it.
See, this “no buyer” thing sounds scary, but in reality, it doesn’t play out like that.
You won’t be sitting there with an option and literally zero buyers. There’s almost always some bid. The issue is that the bid might be bad.
Say you buy at 20, the market moves, but the best buyer is at 6 or 7. Now you either take that hit or wait and risk losing more. That’s the real problem.
As an option buyer, your maximum loss is only the premium you paid. Nothing beyond that.
Where people get into trouble is buying useless strikes far OTM or deep ITM where there’s barely anyone interested. If you are trading in ATM or near strikes and trade the current expiry, this issue mostly goes away.
So yeah, you won’t get “stuck”. Worst case, you exit at a bad price or lose your premium. That’s it.