Option contract bid ask price difference

[NewStarS]

Hi Members,

I have question regarding Bid & Ask price of option contract. I was checking NSE option chain contract for stock options.

I was seeing some options have high spreads. How some can make profit with it. Specially if anyone plans for intraday trades?

For example today SBI 205 Strike put option pricing is
Bid: 22.75
Ask: 24.45
Spread: 1.7
With minimum 2000 lot that is Rs. 3400/- Isn't that too much?

Regards
Thank you

 

[TradeOptions]

Hi Members,

I have question regarding Bid & Ask price of option contract. I was checking NSE option chain contract for stock options.

I was seeing some options have high spreads. How some can make profit with it. Specially if anyone plans for intraday trades?

For example today SBI 205 Strike put option pricing is
Bid: 22.75
Ask: 24.45
Spread: 1.7
With minimum 2000 lot that is Rs. 3400/- Isn't that too much?

Regards
Thank you

brother, welcome to the world of NSE Stock Options !
Notice the spread for a few more days and you would say that this spread is nothing. Because most indian stock options are extremely illiquid and have far greater spread then this.

 

[Help_Mee]

Hi Members,

I have question regarding Bid & Ask price of option contract. I was checking NSE option chain contract for stock options.

I was seeing some options have high spreads. How some can make profit with it. Specially if anyone plans for intraday trades?

For example today SBI 205 Strike put option pricing is
Bid: 22.75
Ask: 24.45
Spread: 1.7
With minimum 2000 lot that is Rs. 3400/- Isn't that too much?

Regards
Thank you

May I know How do you profit from it?
It's just one script, it's not pair.

 

[bpr]

deleted...

 

[cloudTrader]

Hi Members,

I have question regarding Bid & Ask price of option contract. I was checking NSE option chain contract for stock options.

I was seeing some options have high spreads. How some can make profit with it. Specially if anyone plans for intraday trades?

For example today SBI 205 Strike put option pricing is
Bid: 22.75
Ask: 24.45
Spread: 1.7
With minimum 2000 lot that is Rs. 3400/- Isn't that too much?

Regards
Thank you

Rightly said by TradeOptions , stock options on our exchanges are highly illiquid in many scrips, and in some scrips this difference will be huge.

This is the reason some brokers do not allow market orders in Stock Options , otherwise one may fall into trap of buying very high or selling very low unintentionally.

 

[NewStarS]

Thank you TradeOptions & Leonid for your view.

About market order, then what kind of orders brokers does provides?
My concern is about Zerodha or any discounted brokers.

Actually I can't plan my option strategy until I get to know about this spread difference.
I am planning with zerodha..but if they have same illiquidity then it's worth less for me to trade option in intraday...

Regards

 

[cloudTrader]

Thank you TradeOptions & Leonid for your view.

About market order, then what kind of orders brokers does provides?
My concern is about Zerodha or any discounted brokers.

Actually I can't plan my option strategy until I get to know about this spread difference.
I am planning with zerodha..but if they have same illiquidity then it's worth less for me to trade option in intraday...

Regards

NewStarS,

Make sure to enter into Options trading with a lot of caution & preparation.
Avoid at once even thinking about trading into illiquid Options. Results can be nasty.

Find out scrips which have liquidity [volume is good]. Liquidity is independent of any broker. It is dependent on the market makers.

Brokers provide Limit Orders [quite safe] on trading Options. Limit orders are those where you will only get filled when the price of the instrument reaches your order price.

Nifty Options are quite liquid. Banknifty Options at near strikes are also comfortable to trade in.

 

[NewStarS]

Thank you Leonid for your kind advice..specially for the limit orders.

I will look at the volume then..Previously I had craziest idea of choosing illiquid options buying it at low price (mostly OTM) & selling it at high price.

Stock options like MRF...It shows bid price 0.05. On sudden if it reaches to Rs.1, I can still make money. Had a thought like this...

Regards

 

[cloudTrader]

Thank you Leonid for your kind advice..specially for the limit orders.

I will look at the volume then..Previously I had craziest idea of choosing illiquid options buying it at low price (mostly OTM) & selling it at high price.

Stock options like MRF...It shows bid price 0.05. On sudden if it reaches to Rs.1, I can still make money. Had a thought like this...

Regards

At the first go it seems that money could be made in OTM options like that but its not really easy. OTM options can very quickly burn capital if not handled properly.

First thing is to study particular scrips [price movement, intrinsic volatility, total volume traded, historical volatility etc.] in which you want to trade options, then only decide about to have a go at them or not.

 

[NewStarS]

Yes also keeping the Greeks in mind...