Options vs Forex Volume Liquidity Question

[Aston01]

I have read a fair amount about how liquid Forex is and the massive quantities moving around in it, but I just can't seem to nail down an definitive answer as to the size and liquidity of the Options market.

Could someone possibly clarify a couple of things for me if possible?

1.) Due to all of the different "Options" when buying Options whether it be Strike Price, Expiration Date, etc., how large is the individual market after it has been splintered so heavily within lets say an ATM Call on Apple expiring within 1-3 days ?

If the Open Interest for the day was 20k contracts on that particular call ...could someone decide that they wanted to buy 10-15k contracts and actually be able to get filled and then get back out with relative ease at a later time?


2.) And depending on the answer of #1 could someone decide to buy 50k contracts of say something decent size like Bank of America at a particular strike price when the options were priced at say $0.01 and actually expect their order to be filled or would it have to be split over multiple strike prices just to get the volume (obviously each strike would likely have a slightly different price if this was required)?



Clearly I am using some extreme quantities in the above examples, but I am curious as to what the realistic limits are of the different aspects of the options market. I also am aware that the bid and ask spreads are often what are being referred to regarding liquidity.

 

[rmorse]

Quote from Aston01:

1.) Due to all of the different "Options" when buying Options whether it be Strike Price, Expiration Date, etc., how large is the individual market after it has been splintered so heavily within lets say an ATM Call on Apple expiring within 1-3 days ?

If the Open Interest for the day was 20k contracts on that particular call ...could someone decide that they wanted to buy 10-15k contracts and actually be able to get filled and then get back out with relative ease at a later time?

2.) And depending on the answer of #1 could someone decide to buy 50k contracts of say something decent size like Bank of America at a particular strike price when the options were priced at say $0.01 and actually expect their order to be filled or would it have to be split over multiple strike prices just to get the volume (obviously each strike would likely have a slightly different price if this was required)?
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Equity options are very liquid is about 10% of the option out there. Options that are based on active equities, less than three months and OTM are the most liquid. Normally I'd say that indexes like SPY and IWM are more liquid than equities because more traders follow them. With that:

1) Apple is followed by a lot of traders. Because it's a $500+ stock, if you try to buy 10K contracts on an ATM strike and the stock is stable, you might have to move the option .05 to .10 unless you use a broker. With a broker, you might find liquidity of more than that. When we talk about lower priced names that trade good equity volume, like GE, Intel etc. I've seen 200,000 lot spreads go up and traders would have done more on the bid or offer. Again, when your trading large lots, it helps to use an options broker to find liquidity. In many options, if you enter a large option order electronically, the MM system make the sale that's posted then hedge and reset vols.

Having many strike prices is not an issue with liquidity.
2)An option like BAC, can be very deep. It always depends on the current market. A stable stock, with deep markets, that's low priced, where vol does not change often, can be very liquid. Right before an event like earning, your more apt to see the market move with large orders.

BTW: You said multiple strike prices. I assume you meant multiple prices. And when you said buying an option at .01, I assume you meant trading options that are in the Penny pilot program.

I hope this helps,

Bob