Assessing Sparse Options Volume for Liquidity and Days to Sell

Summary

The document raises a practical liquidity measurement problem: estimating how long it may take to sell an options position. It uses median daily traded value over a 90-day window as a reference measure for other assets, then points out that options activity can be highly uneven, with many low-volume days and occasional large-volume days. That pattern can make the median daily traded value a poor summary of typical tradability.

The author asks how to build a more suitable options liquidity measure or obtain consistent volume data for specific contracts. No estimator, data source, or empirical comparison is supplied, so the document does not resolve the question. It identifies a challenge for liquidity risk reporting: contract-level options volume may be sparse and uneven, and a single daily-volume statistic may not reliably represent execution capacity or days to sell.

Key ideas

• Median daily traded value over a fixed lookback can be used to estimate liquidity and days to sell.
• Options volume may be uneven, with many quiet sessions and occasional high-volume sessions.
• A median based on sparse options trading may misrepresent practical liquidity.
• The document asks for alternative measures or more uniform contract-level data but provides no solution.

Tags

# Methods to estimate Options volume


# Methods to estimate Options volume












I need to build a Liquidity Risk report at my intern job. There, I consider an MDTV90 (Median Daily Traded Value for 90 days, a measure of liquidity) for each asset we trade to find how many days we spend to sell it (Days to Sell). It is quite easy for equities because historical data is widely known. Although, when talking about options, we have very sparse volume data (they follow kind of a power rule: most of the days have small trade volume, and some days have big trade volume), so the resulting MDTV is not a great value to represent Daily Liquidity

Then, I would like to know how I can compute an MDTV liquidity alternative for Options or fetch uniform volume data for specific options?

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