Are Iceberg Orders More Effective at Reducing Slippage for Options with High or Low Open Interest?

Iceberg orders are generally more effective for options with high open interest and high volume. High open interest indicates a deep, liquid market with many participants.

In such an environment, the small, visible tranches of an iceberg order can be easily absorbed without causing a significant price impact. In a low open interest (illiquid) market, even a small visible order can represent a large portion of the day's typical volume, making the iceberg pattern more obvious and potentially moving the price, thus failing to prevent slippage effectively.