Why trade Options if volume is so low

AakashM · #1 21st March 2008, 02:45 PM

Hi
I'm new to option trading. I'm considering learning Options in detail.

Is the options market worth trading in, in India with such less volume compared to Futures.

One example:
Reliance 1M Futures - 150,000 lakhs traded volume
Highest Option volume at 2220.00 strike price - 3,700 lakhs traded volume
(Data from NSE India)

Thanks,
Aakash

beginner_av · #2 21st March 2008, 11:36 PM

Yes it is!

oxusmorouz · #3 22nd March 2008, 08:28 AM

Low volumes? There "are" no volumes at all for some options!

ayurakshapad · #4 22nd March 2008, 03:10 PM

Quote:

Originally Posted by oxusmorouz

Low volumes? There "are" no volumes at all for some options!

try to catch wat trader is trying/asking to point instead of leg pulling!!!!!
nt a good habit, (observation frm past comments on various topics)

vvv0501 · #5 22nd March 2008, 03:54 PM

Quote:

Originally Posted by AakashM

Hi
I'm new to option trading. I'm considering learning Options in detail.

Is the options market worth trading in, in India with such less volume compared to Futures.

I have been trading options for over a year and my advice is you can pretty much forget about trading in options on individual stocks. There is simply not enough liquidity in even at-the-money options and you will get killed by the slippage.
Nifty options trading is possible, though even those are not as liquid as one would like. I find that the best way to trade options in our market is to adopt a strategy to take advantage of the time decay, as the actively traded options are always the near-month options that lose time value rapidly in the second half of the month. Best strategy is to write out-of-money options (somewhat risky) and put on credit spreads a week or two before expiry.

raosrinivas · #6 22nd March 2008, 03:55 PM

Quote:

Originally Posted by ayurakshapad

try to catch wat trader is trying/asking to point instead of leg pulling!!!!!
nt a good habit, (observation frm past comments on various topics)

oxy is a decent, serious guy. he does not try to pull anyone's leg(s) from what i have seen. no volume thing is a fact that he mentioned, not even sarcastic, far from leg pulling.

dr_tejas_shah · #7 22nd March 2008, 04:23 PM

Quote:

Originally Posted by vvv0501

I have been trading options for over a year and my advice is you can pretty much forget about trading in options on individual stocks. There is simply not enough liquidity in even at-the-money options and you will get killed by the slippage.
Nifty options trading is possible, though even those are not as liquid as one would like. I find that the best way to trade options in our market is to adopt a strategy to take advantage of the time decay, as the actively traded options are always the near-month options that lose time value rapidly in the second half of the month. Best strategy is to write out-of-money options (somewhat risky) and put on credit spreads a week or two before expiry.

Can you explain it in bit more details?

oxusmorouz · #8 22nd March 2008, 05:04 PM

Quote:

Originally Posted by ayurakshapad

try to catch wat trader is trying/asking to point instead of leg pulling!!!!!
nt a good habit, (observation frm past comments on various topics)

I'm afraid you have misunderstood. Have you considered the bid-ask quotes of options in companies like Sasken, CESC, Hindzinc? It's pretty frustrating even looking at them!
I don't seek to enter into an altercation here but just a note : it does pay to be unbiased. If you do have something personal, let's have it straight.

franktrader · #9 22nd March 2008, 05:26 PM

Quote:

Originally Posted by raosrinivas

oxy is a decent, serious guy. he does not try to pull anyone's leg(s) from what i have seen. no volume thing is a fact that he mentioned, not even sarcastic, far from leg pulling.

i too feel so

ayurakshapad have misunderstood oxy's comment here ...

lack of liquidity is a BIG issue in trading Indian options.

SGM · #10 22nd March 2008, 05:59 PM

Quote:

Originally Posted by vvv0501

I have been trading options for over a year and my advice is you can pretty much forget about trading in options on individual stocks. There is simply not enough liquidity in even at-the-money options and you will get killed by the slippage.
Nifty options trading is possible, though even those are not as liquid as one would like. I find that the best way to trade options in our market is to adopt a strategy to take advantage of the time decay, as the actively traded options are always the near-month options that lose time value rapidly in the second half of the month. Best strategy is to write out-of-money options (somewhat risky) and put on credit spreads a week or two before expiry.

Hello VV

Right on the Spot

With a bit of directional play involved one can build a credit spread legging into one side at a time (intraday). Can start doing it around 10 sessions (days) to expiry (abt 2 weeks), slowly scaling into the position and building it to the size.

But not for newbies. A short option can be dangerous to your financial health, do not try unless you understand the risk and can mitigate it.

Regards
Sanjay