How Does the Choice of Settlement Affect the Liquidity of the Options Contract? ▴ Learn

How Does the Choice of Settlement Affect the Liquidity of the Options Contract?

Cash-settled options are generally more liquid than physically settled options because they are simpler to manage and appeal to a broader range of speculative traders. The standardization and reduced operational complexity of cash settlement make the contracts more tradable, leading to tighter bid-ask spreads and higher trading volume.

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What Is the Difference between Cash-Settled and Physically-Settled Futures?