Can long-dated contracts be traded in Zerodha?
Zerodha allows trading in long-dated contracts, but clients must check the liquidity of the option contract by examining the market depth before trading. In case the stock is illiquid, there is a high risk for clients if the market moves against their position and there is no counterparty to exit the loss-making position. Moreover, for illiquid contracts, there is a possibility of order execution at a price away from the option's theoretical price, which may require clients to provide additional margins to cover their losses. Failure to do so may result in the broker being held responsible as per regulations. The below nudge is displayed to inform clients about long-dated contracts.
Market orders can lead to considerable fluctuations in contract prices, posing regulatory implications for brokers. Therefore, market orders are blocked. Zerodha blocks trading in near-month and far-month stock option contracts if the last traded price (LTP) and open interest are zero. Similarly, for index options, trading is entirely blocked for far-month and long-dated contracts if the LTP and open interest are zero.