Most Liquid Options

I would screen out all the stocks that have under 10,000 daily contracts traded right away.

Look at the option strikes that have a higher open interest.

Certain strikes are more popular, as they are close to the money or are at round numbers.

Think Tesla 990 calls vs. Tesla 1000 calls.

These strikes will often have greater liquidity and a narrower bid-ask spread.

Monthlies have more liquidity than weeklies.

As a general rule if there are weekly contracts available the monthlies will still have more liquidity.

The monthlies are the options expiring on the 3rd Friday of every month.

Consider executing trades around midday.

Options market makers compete against each other to have the bid-ask price as tight as possible.

When the market first opens prices are more volatile and spreads will be wider.

Yet as volatility settles after the open spreads will often tighten as market makers are not as worried about being picked off by price jumps.

Find hidden liquidity for yourself.

Place a limit order slightly below the ask and see if you can find hidden liquidity.

If not move the order down a few pennies or let it rest and see if you get picked off.

Simply by using these five tips you can guarantee that you will be not paying much in transaction costs and make sure you are trading a liquid underlying.

If we are not satisfied with the liquidity of the options we can trade the underlying.

Buying the stock itself will always be more liquid and should be considered if we have a directional view.

Most Liquid Stock Options

Below you will find a list of some of the most liquid options on individual stocks.

Some of these names may be a little surprising, but this data is from March 2021, right around the time of the Gamestop / short squeeze craziness.

Pretty funny to see names like NOK< AMC and GME as the most liquid options.

Summary

Liquidity is the cost of doing business in the options space.

When placing trades it is always important to focus on the liquidity of the underlying.

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Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are ...

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