This is the extract of feb series option chain from nse site..when market is around 5804.
Code:
Volume Bid Bid Offer Offer Strike Price
Qty Price Price Qty
- 50 759 1,141 100 *5000.00*
- 50 670 1,101 100 *5100.00*
4 50 640.85 719.95 500 *5200.00*
[B]10 50 552.75 724.95 500 *5300.00*
11 50 426.05 624.95 500 *5400.00*[/B]
215 200 400 419.4 500 *5500.00*
40 1,800 317.5 338.35 1,650 *5600.00*
173 50 256.55 265.4 500 *5700.00*
3,477 500 194.2 196.7 50 *5800.00*
8,725 150 141.3 142.25 100 *5900.00*
12,355 50 97.25 98.35 50 *6000.00*
notice the wide bid-ask spread and thin volume for those deep ITM contracts.
For some reason if you have to squareoff your position in the market, then you will be able to buy it back almost 200+ rs above mkt price (eg - 5300 contract which is worth 400 is selling at 724 rs).
Moreover, ITM contracts will have higher margin requirement too.
Observe the ask price of 5200/5300/5400 contract. Qty is 500, quote is ending in 95 paise, and price is x19 or x24 slightly below the round number of x20 and x25. And the price is rediculously high.
To me that looks like a shrewed option player's order ready to trap newbie or someone's typo mistake. So beware of it.
So IMO, just because of low liquidity, these deep ITM contracts are not worth trading in our market.
But if you can find good price and strikes, then trading ITM spread is nice low risk income generating strategy. eg - Jan 6000-6100 put spread (buy 6100 put, sell 6000 put) would cost (307 -223 = 84) for eventual value of 100 points. I.e. if market remains below 6k, then your investment of 84, is going to fetch u 100 points i.e. profit of 16 points in next 20 days. That is 800 rs return on 30k of margin investment giving 2.5% in 20 days (ofcourse this needs to be adjusted for stt/brokerage etc).
Happy Trading