Just to clarify - First off I it never makes good sense to buy something with the intention of reselling it when there is no market for reselling the item. I was wondering though in the event that you were caught in a situation where you owned an option, and for one reason or another were not able to get it sold at the point you wanted due to lack of liquidity in the market, would it ever make sense to exercise the option and try to sell the actual stock ? This coming with the assumption that by nature options are generally less liquid then the underlying stock.
If the market is so illiquid you can't even get the intrinsic value of your option then it makes sense to exercise your option and sell the stock (if it was a call) or buy the stock (if it was a put).
It only makes sense to exercise for stock (long or short) if your long option is trading below parity. If there's any time premium remaining, better to close the option.
I had the problem when i bought illiquid options on an ISE Index. Since I could only exersize on expiration, they would not even buy from me at prices less than intrinsic value. I had to wait to expiration where it was cashed exersized. Lesson learned. without liquidity
Just a side note, deep ITM European-style puts trade below parity prior to expiration due to their nature, so maybe you didn't go low enough below parity to get a fill (assuming you had deep ITM puts).
with no open interest the bid ask spreads were $5 wide. So I had something like intrinsic value at $10 They were Bid $6 Ask $11 So I place an order at somewhere like $9.50 and it sits in the book. I am throwing away $50 and they won't bite.
What was the symbol of the product you were trading? As mentioned by others there are several reasons a European option may trade under parity. I agree of course that a 5 wide quote is untradeable, but I am guessing that fair value may be in the middle of the quote, around 8.5, so your 9.5 offer was not throwing away $50 but would be selling over fair value.