Why can't i buy far OTM options?

F&O
1

Zerodha,
Why don’t you allow me to buy far OTM options? i just want to buy them to get the hedge margin. but since you are restricting i am unable to hedge.
Why don’t you allow this while other apps such as fyers or dhan or so many others allow it upto 20% from strike price? i mean for godsake its not as if these OTM are illiquid. still you stop me from buying them.

internet is filled with comments like zerodha is not good for sellers. and people have migrated to different apps. i am doing the same thing. but still i want to ask.

And NO NO. i don’t want to go to orbis just because you say so. if i use orbis then i can’t use my pledge margin. i have to sell in all cash which i don’t want to.

2 Likes
2

Hi @Idris_Khan, this restriction is due to the Open Interest limits put in place by the regulators.

SEBI regulations mandate an upper limit on the OI of each F&O contract at every broker, set at 500 crores or 15% (whichever is higher) of the total OI for that specific contract across the market. As Zerodha has a considerable number of active users trading index options, there are restrictions on buying OTM (Out of the Money) options for specific strikes to maintain OI limits within the allowed ranges.

However, we do allow buying options outside the allowed range for hedging purposes if you hold a short option position. So, if you already hold a short option position, you can buy option at any strike price to the extent of the quantity shorted. You can learn more on this here: Why are there restrictions on placing Bank Nifty and Nifty option orders for certain strike prices?

Btw, if you want to trade without any restrictions, you can migrate your account to Orbis. You can learn more on this here: How to open an Orbis custodial account to trade restricted Nifty and Bank Nifty option strike prices?

3

Hi,

I Think you don’t Know the SEBI rule . You(Zerodha) are just making fool to the retail traders . Please check the link Below .

https://www.nseindia.com/regulations/measures-for-deep-otm-contracts

Regards
Santosh

4

Thanks for the response. but as per the link you shares it says i should be able to buy far OTM for hedging purpose atleast . but i have tried many times it doesn’t let me with the same error.

I have moved to fyers as of 14th Nov. there i am allowed to sell far OTM as well. which is working in my favour for the strategies i wanted to apply. without creating a ORBIS account.

without needing to create orbis in fyers. i can do swing along with option trading both at once with pledge margin.

5

Hi,

Earlier I was suffering same problem with Zerodha and now I shifted some of my funds to another broker and it is working well . Please share your eamil id so that I can send you all details . And also please read the link throughly, it is saying 30% far OTM from the spot can only used for Hedge, not all the OTM .

Thanks
Santosh

6

Now still Zerodha, not allowing option buying in Far OTM strikes ? for hedging or other purposes ?

Can Option sellers consider Zerodha ?

7

Hi @Mohan_Kumar3 , as mentioned above. We allow buying of any strike for hedging purposes if you hold a short option position, to the extent of quantity shorted.

Also, we are allowing almost all strikes in all index contracts.