What Are Mini Options?

Purpose: To Trade Options on Expensive stocks

The previous sections discussed concepts in the context of Standard Options. Lets now take a look at another kind of options- Mini Options.

Mini Options provide a cheaper way to buy options on expensive stocks.

What was the need to introduce Mini Options?

Buying Standard Options on some high-priced stocks might be too expensive for a lot of option traders. Mini Options provides a feasible way to buy options on those stocks. A Standard Option is a contract for 100 shares whereas a Mini Option is a contract for 10 shares.

In another words Mini Options are 1/10th the cost OR cost 10 times less than Standard Options. If 1 contract of a Standard Option costs $5,000 (excluding trade and option contract commissions), then 1 contract of Mini Option will cost roughly about $500(excluding trade and option contract commissions).

Sample Example: Call Options for Stock A - Expires on July 20, 2013

Strike Price Symbol Direction Change Last BID ASK Delta VOL OPEN INT
240.00 stocka12xx Down 0.0 56.0 49.1 50.0 0.80 20 30

Referring to the Options Chain above for Strike Price $240:
Buying 1 contract of Standard Option will cost around
Buying 1 contract of Mini Option will cost around
: 50 * 100 = $5000 (excluding trading fees), whereas
: 50 *  10 =   $500 (excluding trading fees)

Hence, if you don't have $5,000 to buy 1 contract of Standard/Regular Option for Strike Price $240 on this stock, but are really interested in it, buy 1 contract of Mini options for $500 instead and still have a bet on the stock!

Pointers

  • Choose Liquid Mini Options! Please see link Illiquid Options on the left menu on how to spot Illiquid Options in general
  • Mini Options are available on selected stocks
  • Mini Options are available on both Standard and Weekly Options
  • Standard Options are a contract for 100 shares whereas Mini Options are a contract for 10 shares
  • Mini Options cost 10 times less AND are Less leveraged(since only 10 shares investment) than Standard Options
  • The Time Value Decay and Exercising logic of Mini Options is the same as that of Standard Options




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