For options trading, liquidity (how easily you can buy or sell) is crucial. Low liquidity, often due to low interest or market calmness, makes trading harder. This results in bigger price gaps between buying and selling (wider spreads) and makes filling orders efficiently difficult, increasing your risk without guaranteeing order execution.

What does it mean if an option has low liquidity?

Low liquidity means there are very few active buyers and sellers for that option contract. This makes it difficult to enter or exit positions quickly without affecting the price. Low-liquidity options are typically characterized by wide bid-ask spreads, low trading volume, and limited open interest.

What are the risks of trading low-liquidity options?

• Wider bid-ask spreads: You might pay more when buying and receive less when selling, reducing your overall returns.
• Higher slippage: Your order could be executed at a significantly worse price than expected, especially during volatile conditions.
• Exit challenges: You may find it hard to close your position at a fair price — particularly for far out-of-the-money (OTM) options, which attract fewer traders.

How can I manage low-liquidity risks on Syfe?

• Use limit orders: Set a specific execution price to avoid unfavourable fills instead of relying on market orders.
• Avoid far OTM strikes: These contracts often have poor liquidity and wider spreads.
• Trade near-month contracts: Options expiring sooner tend to attract more volume and tighter spreads, making execution smoother.

The information above is general guidance and should not be considered a trading recommendation.