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.

 

[anley]

If you pay a good price then you'll be able to buy all the options you want. Also, nobody is going to sell 50,000 BOA options at 1 cent to you or anyone else.

 

[RPEX]

Firstly, the FX market is a cash market, options are derivatives. I don't see a point in comparing them as they're totally different things.

1. & 2. For any size like that you wouldn't go through the screen there won't be enough volume. If you told your broker you wanted 20k contracts and the open interest across all of the exchanges (there are about 9 equity options exchanges in the US, +/- some other networks) was only about 20k or so, they would contact all of the dealers who provide liquidity to the relevant exchanges and get quotes from all of them. If you were doing this naked (not selling the underlying stock) this in itself would probably raise alarm bells and you certainly wouldn't get the option for the price on the screen. Especially with single stocks dealers are going to be suspect because of the risk of takeovers/mergers/very bad news.

 

[Rhody Trader]

Firstly, the FX market is a cash market, options are derivatives.

That's not actually true. The retail forex market is totally a derivative market because there is never any exchange of currency, just the perpetual agreement to do it in the future. As for the inter-bank market, swaps and forwards represent a massive share of the volume. In London I believe spot is actually well under 50% of the flow.

 

[RPEX]

That's not actually true. The retail forex market is totally a derivative market because there is never any exchange of currency, just the perpetual agreement to do it in the future. As for the inter-bank market, swaps and forwards represent a massive share of the volume. In London I believe spot is actually well under 50% of the flow.

Fair point retail fx/SB is basically just a bet between 2 parties. Also i heard spot was even less than that, forwards the biggest i think dunno check BIS.