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For example, options trade volume is less than that of equities, and most option trading is concentrated amongst a small group of top companies.

However, that doesn't mean that there are profitable trading opportunities on other stocks.

Is the factor limiting option trade volume (1) option sellers/writers or (2) option buyers?

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In general, it is difficult to say one side of the market is the limiting factor. If I am willing to sell something for 101 and you are willing to buy it for 99, whose fault is it if we do not complete a transaction?

On the other hand, if you entered a market sell (buy) order and it was not filled, you could say that the lack of buyers (sellers) were the limiting factor. You might see this if you tried to sell very low strike puts or or high strike calls. If the option you are trying to sell is worth less than a penny, but a penny is the tick size or minimum bid, the order might not get executed.

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There are two obvious reasons why why option volume is less than equity volume, First, a standard option is for 100 shares. As an example, an investor seeking to replicate a stock position with lower risk would only buy one high delta LT call to have an almost equivalent position. Second, options are more complex and far fewer investors/traders use them, compared to equities.

The limiting factors are the number of willing traders, their size as well as the price that they are willing to trade at.

To make things a bit more complicated, puts and calls of the same series are connected in value by arbitrage strategies called conversions and reversals. So if there's a call buyer willing to overpay, then a floor trader or market maker can take the other side and buy the stock as well as the put to lock in a gain (conversion). I say overpay because for example, it might be an option with a wide spread and the buyer doesn't realize that fair value and an executable price might be closer to the B/A midpoint. So in this case, the call buyer precipitated other buying and selling. IOW, it can also be interconnected.

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