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

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?