**Editor's note: Your portfolio can have better protection now with that mini options are available. That's actually one of the main purposes of options: as insurance for your investments. Options have always been available. The problem before? 1 options contract is insurance for 100 shares of stock (or ETF)! Even for conservative investors who want to sell covered calls on stocks they own for extra income - the simplest option strategy, you couldn't if you didn't have at least 100 shares of something. This discriminates the small individual investors, aka retail traders, from being able to protect their portfolios like large funds who have thousands or millions of shares (so they can use regular options for each 100 shares). Mini options allows you to work with just 10 shares of a stock.
Today March 18th the New Mini Options will start but only on these 5 Names:
- Apple Inc. (NASDAQ: AAPL)
- Google Inc (NASDAQ: GOOG)
- Amazon.com, Inc. (NASDAQ: AMZN)
- SPDR S&P 500 ETF Trust (NYSEARCA:SPY)
- SPDR Gold (ETF) (NYSEARCA:GLD)
Advantages of Mini Options:
- geared for the smaller retail trader since will allow you to hedge even if you own 10 shares of any of the positions above . In past would have to be minimum 100 shares to hedge since options based on 100 share increments. Now if you own less than 100 shares of AAPL or GOOG you can now do covered calls etc.
- like the weekly options when they were first introduced will probably roll out to other stocks over time.
- 8 of the 11 options exchanges will start them Monday March 18th
- great way to test out new options strategies into earnings without risking as much money.
- One trader in our group TraderJim64 said could help take advantage by hedging Delta – ex . sell AAPL calls with Delta of 70 and could sell 7 mini contracts to be Delta neutral. He was going to check into this as would be creative strategy that advanced option traders could take advantage of.
- Amount invested into a specific strategy is much lower since you can do as little as 10 contracts your total cost can be as little as 10% of regular 100 contract orders.
- Commissions are slightly lower a few members checked and was about 50% less commission $5+ . ISE said it will charge 1/10th of its normal fees.
- like the 100 share contract options the mini options are American-style options and can be exercised at any time up to expiration.
- A side benefit that @cerebraltrades made in this past week’s @bullbear22 Newsletter was the benefit to online brokers that will make more commissions from mini options like : $AMTD $ETFC $IBKR etc.
Disadvantages of Mini Options:
- initially limited to the 5 names above ($AAPL $GOOG $AMZN $SPY $GLD)
- commission costs as a % of total cost will be higher so may be better to do 50+ contracts vs only 10.
- new so the smarter money and more experienced options traders will take advantage of any mistakes by non-experienced options traders. For example I remember when I first learned regular options I made entry order errors on a few positions and bought too many options.
- if you own an odd # of shares and wanted to do covered calls you still can’t hedge perfectly. Example: you own 25 shares of AAPL or GOOG , then you can only hedge 2 contracts so hedge 20 shares, if 35 you could only hedge 3 contracts or 30 shares. Then you would have to hold the extra odd number of shares or sell them.
- Nasdaq’s PHLX exchange will launch trading of mini options till March 22
- may be more confusing for the new options traders since now we have leaps, quarterly, monthly, weekly, shorties (further out weekly options) and now mini options.
- Liquidity initially may be a problem and as @cerebratrades mentioned in this past week’s @BullBear22 Newsletter that he expected spreads to be wider initially as traders get use to these new mini options. If they gain any popularity is yet to be seen.
What are the ticker symbols for Mini Options ?
the mini options tickers will end with a 7 or an 8
Most traders will most likely watching and trading the 7′s
- Mini Options ticker for Apple Inc. (NASDAQ: AAPL) will be AAPL7
- Mini Options ticker for Google Inc (NASDAQ: GOOG) will be GOOG7
- Mini Options ticker for Amazon.com, Inc. (NASDAQ: AMZN) will be AMZN7
- Mini Options ticker for SPDR S&P 500 ETF Trust (NYSEARCA:SPY) will be SPY7
- Mini Options ticker for Gold (ETF) (NYSEARCA:GLD) will be GLD7
AAPL8 GOOG8 AMZN8 SPY8 and GLD8 will identify corporate actions on the underlying stock. This may be good to watch for unusual volumes and action.
Mini Options will have the same expiration dates & strike prices as the Standard, Weekly and Quarterly Options Series.
More info on Mini Options here: