Illiquid Option


DEFINITION of 'Illiquid Option'

An option contract that cannot be sold for cash quickly at the prevailing market price. Illiquid options have very low or no open interest.

BREAKING DOWN 'Illiquid Option'

Most options are illiquid when they are far away from their expiration dates. If you're holding an illiquid option, you will usually notice a very large bid-ask spread on the contract. This is because there are not enough buyers to accommodate those wanting to sell.

Unfortunately, if you are trying to sell an illiquid option, there is a good chance you'll be selling at a discount, if at all.

  1. Liquidity

    The degree to which an asset or security can be quickly bought ...
  2. Option

    A financial derivative that represents a contract sold by one ...
  3. Expiration Date (Derivatives)

    The last day that an options or futures contract is valid. When ...
  4. Discount

    The condition of the price of a bond that is lower than par. ...
  5. Illiquid

    The state of a security or other asset that cannot easily be ...
  6. Bid-Ask Spread

    The amount by which the ask price exceeds the bid. This is essentially ...
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