This post was originally written on March 18, 2013 at http://www.optiontiger.com/mini-options-contracts/
Mini Options Contracts
There is an important addition today to Options trading instruments. CBOE is introducing "Mini" Options with a base of 10 shares per contract as opposed to the standard 100 shares per contract.
You will notice these Options that have a (10) number and on the Thinkorswim platform, they are also denoted with the word "Mini".
Advantages of Mini Options -
1) Now if you owned 40 shares of a stock, then you can hedge it with 4 contracts of the Mini. Previously the minimum you could buy was 1 contract which would be equivalent to 100 shares. Obviously you were over-hedging at that point.
2) And on the flip side, you could design a "covered call" strategy that precisely matches your holdings.
3) Of course, you can deal in much less size, especially on high priced stocks like AAPL or GOOG.
Not all stocks have Mini contracts yet. They're in fact starting out only with a few. The list is provided here on the CBOE website. Over time, they expect to add more.
Please see image below on the Thinkorswim platform for AMZN.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.