Yes, the key is to trade options on stocks that are thick and not as volatile. If the underling has liquidity, so will the options. MM's don't like to quote narrow markets and then have to go to the stock to hedge and the stock rips .50 in his face. As long as the underlying is volatile, you won't see narrow bids and offers. However I have found that these stocks can be fun to leg into. On another thread I mentioned how I like to pick the tick. It allows me to get a free nickel or dime on really volatile options and stocks. So the wide spreads don't bother me.
Options volume in ES is negligible, and markets are not always displayed. If you need to trade index options electronically and you're sensitive to liquidity issues then examine QQQ. With 800 shares of QQQ equaling 1 NQ contract, QQQ options are a clear proxy for trading nonexistent options on NQ. I assume you trade through IB. If that's the case you can route through smart, but I'd also list QQQ through ISE separately so that in a fast market you can be assured of not getting routed to a regional and getting lost in the mix. If you must trade options on the 500's the SPX is your only viable venue, but because SPX is CBOE traded exclusively, it's liquidity is much inferior to QQQ.
Hi Eldredge, I print the list of most active options from www.cboe.com. CBOE's website. They list the 100 stocks with the most active options which I use to make my picks from. I'm just begining but I will be trading in the money options with a high delta so the trade runs like a futures contract almost. Many of the options have a spread no bigger than .10, and trading in the money options makes your spread paid a smaller percentage of the option premium. Hope this helps. Russell.