Why zerodha rejecting far otm options?

Why Zerodha is rejecting far OTM options ?
Astha, Upstox, Aliceblue are entertaining such options. It certainly reducing Zerodha clients !

Yes @nithin @siva please any update on this

I understand there is a limit, and Zerodha was working on getting another membership (second one) to increase the limit.

Please clarify on this, it is one of the biggest drawbacks and most other brokers have this advantage

We are working on this but for now on expiry day the limit is extended to much farther strikes.

Sometimes its good not to go for far otm calls as greeks play better role in nearby strikes to price.

It’s not a question of what to trade. I am daily earning on my own Hero-Zero calls. I select farthest (800-1200 difference) options at sometimes.

@siva @nithin Could you please elaborate what exactly do you mean by working on it? Is that something the exchange has to allow you (brokers) or these far OTM options are blocked at Zerodha’s end?

How is that other brokers can and you have a limitation?


Each broker is limited to have 15% of total market OI, good or bad we are hitting it, check this limits.
Other brokers may not hitting because of their size.Hence we are forced to limit buying in OTM on Index sometimes, shorting is allowed on all strikes.

We are moving few big clients who buy OTMs to use custodian route so that our OI will be shifted to their books even though we are their brokers thus freeing our limits. We will be shortly moving them. Also we are trying other options to address this hence asked for sometime.


@siva @nithin Any updates when will we be able to trade in far OTM strikes?

Hi, if you have taken a Short Option position, you can take Long position outside allowed range to the extent of quantity you have shorted.

Adding to shubh, alternatively you can check this to trade in all strikes.

Regarding migration of account to ORBIS, how does it work? If I am also holding a DEMAT account with stocks. Is it still possible to migrate or is it purely only for option trading?

One can migrate but for now you can’t sell/but equity, maybe can use other family member account to buy eq if required.

Looks like this problem still persists. Is there any remediation expected

But I will not get any margin benifit by first shorting OTM option and then hedging by buying far OTM option right?? I will have to pay full marging for both the positions, correct?

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Exactly wrong ! First buy option & then trade for sell options.

Sir, I am talking about far OTM option here! we are not allowed to buy Far OTM option in zerodha before selling OTM options.

That’s why I trade with Astha & Upstox.

Don’t misunderstand. ZERODHA is the best except this OTM issue. I trade in Zerodha for Cash, Future & Commodity.
We are traders/businessmen & so prefer the broker where we get maximum benefits !

@nithin, @siva
Can we please do something on priority for this issue. With peak margin rule , this will be ome a deal break for most option sellers. The Orbis alternative is not a viable option as pledged margin is not allowed.
This is a chicken and egg situation.

  1. One can’t buy far OTM without shorting a position
  2. To get the margin benefit to short one first needs to have hedge position.

It is a nightmare right now… If I want to take 10 lots of short straddle with margin benefit, currently I need to

  1. first short 5 lots (within available capital)
  2. Take 5 long otm to hedge and reduce margin blocked
  3. Then take another 5 short
  4. Again take 5 long otm to hedge it.
    This is so inefficient.

Can you atleast remove the restriction on the quantity on the long otm position (step 2 above). Currently you can only take the qty equivalent for the short position. If in the above example I can atleast take 10 lots long in step 2… Step 4 is eliminated.
Please help.

To be frank really we can’t do anything about this now, we do understand from traders perspective but Limits are from SEBI and we need to follow them and no other way out.