An option that only a few market participants would be willing to trade at specific strike prices and expiration dates (in the so-called thin market). Traders in such an option contract find it harder to secure suitable counterparties. Thinly traded options are traded in an environment of low market depth, if any. Illiquid markets are often characterized by limited market depth, that is, the existence of fewer buyers and sellers at different price levels. This lack of depth makes it quite hard for traders to locate counterparties willing to transact at desired prices. Hence, executing larger transactions is as there may not be enough liquidity available at favorable prices.

Thinly traded options have either zero open interest or an absolute value of delta smaller than 0.02 or greater than 0.98 on each trading date.

Thinly traded options are opposite to actively traded options.