I had done a little research of my own yesterday (17th April 2013) and reviewed the 140 odd stock options available on NSE (National Stock Exchange, India). I spend around 30 seconds looking at each one of them on the NSE website and tried to categorize them into Tiers based on how liquid they are. As the Tier number increases, the liquidity (number of contracts traded each day) goes down. For example, Tier 1 stock options are more liquid than Tier 3 stock options and so forth.
Most liquid index options on NSE
Nifty, Bank Nifty
Most liquid stock options on NSE
Tier 1 (>2000 Contracts/day – 5)
Infosys, SBI, ICICI Bank, Reliance Industries, DLF Ltd
Tier 2 (around 1000-2000 Contracts/day – 4)
L&T, Reliance Communications, Tata Motors, McDowell-N
Tier 3 (around 500-1000 Contracts/day – 8)
Axis Bank, Airtel, HINDALCO, Reliance Capital, Reliance Infrastructure, Tata Steel, TCS, Unitech
Tier 4A (around 250-500 Contracts/day – 4)
BHEL, ITC, Idea Cellular, JP Associates
Tier 4B (>100-250 Contracts/day – 7)
HCL Technology, HDFC, IDFC, M&M, Maruti Suzuki, Tata Global Beverages, Wipro, Yes Bank
Tier 5 (around 100 Contracts/day – 17)
Cairn India, HDFC Bank, Hero Moto Corp, HUL, India Bulls Real Estate, IFCI, Jindal steel, Karnataka Bank, LIC Housing Finance, ONGC, Ranbaxy, Renuka Sugars, Reliance Power, SAIL, Sesa Goa, Sterlite, Titan.
I quickly glanced at the most liquid strike prices of the options for the month of April 2013 (till 17/04/2013) and classified the stocks into Tiers.
For example, If a stock has around 250-500 contracts traded on each of some of the liquid strike prices each day, then I classified them under Tier 4A.
Please realize that not all strike prices tend to be equally liquid. Usually the strike prices having round numbers (like 100, 150 etc) and the ones closer to the spot price tend to be more liquid. For the classification above, I chose the strike prices which are somewhat more liquid.
Its also important to realize that during certain times (just before and after earnings release, etc) the volumes of the options spike but return to their baseline a little later on. (I have not taken into consideration such spikes in the list above)
Please also note that the classification is somewhat imperfect as I haven’t put a lot of time researching each stock. The whole thing took me about 3 hours to do and I manually spend around 30 seconds for each stock, so there could be mistakes.
If there are any corrections though, please write down in the comments section below and I will correct/modify them.
Changes made to the list
15th May 2013 – Added Yes Bank to Tier 4B
22nd Feb 2014 – Added Idea Cellular to Tier 4A. Removed Future Retail Limited from the list.
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