Mini Options 101: A Comprehensive Guide

What Are Mini Options?

Mini options are types of contracts in which the 10 shares of a stock or exchange-traded fund (ETF) serve as the underlying security. This is the primary difference between standard options and mini options. Normally, standard options use 100 shares as the underlying security.

Mini options are currently unavailable for ETFs of single stocks, but the mini options on indices can still be used. Also known as E-options, mini options are exchange-traded option contracts, and they are a fraction of the value of the corresponding standard option contract.

The mini options are most of the time found listed on benchmark indices, whereby an E-mini index is the underlying asset feature. It is not possible to find mini options listed anywhere other than on major indices. For example, the CBOE’s mini-SPX (XSP) is an option that was launched in 1997.

It was put in place to make tracking the underlying S&P easier. There is an array of mini index options available, and most of them presently trade on the S&P 500, Russell 2000, and Nasdaq 100.

If you’re getting started on trading stocks, you must be well versed with mini options and how they work. In this comprehensive article, we have shared everything you need to know about mini options and the essential purposes they serve.

To get as many details as you can, we recommend reading this piece in its entirety. Also, as a team, we are available to answer your questions in case you have a few things that need further clarification.

Why Were Mini Options Introduced?

If you’re just getting started on stocks due to high stock prices, it might be hard for you, as a small investor, to afford shares. Because of this, there was a need to come up with fairways to enable beginners to afford small shares. This led to the mini option.

The mini options were designed to enhance interest among investors as many of them lack the huge sums of money to afford 100 shares of the high-profile stocks. This new type of option was introduced to let investors own less than 100 shares and increase the number with time.

The number 10 is the contract multiplier that is used for strike prices and premiums in mini options. For instance, if an investor purchases one ABC7 call mini option at a 300-strike price for the quoted price of 5.50, the purchaser would end up paying 5.50x $10=$55 (excluding fees and commissions).

If you opt for the standard option with at least 100 shares deliverable, on the other hand, a multiplier of 100 alongside a quoted price of 5.50, you will end up paying $550. It’s important to understand that not all stocks have mini options.

In the next section, to help you make the best investment decision, we will help you understand the types of stocks that have mini options. Up to this level, you can now tell that the mini options were introduced to help investors who could not raise the capital that is worth 100 shares.

What Stocks Have Mini Options?

Today, there are only a few companies that provide willing investors with mini options:

1. Apple Inc. (AAPL)

As one of the most successful companies in the world, Apple was founded in 1976 by Steve Jobs, Steve Wozniak, and Ronald Wayne to design and sell personal computers. In 1977, the company was incorporated as Apple Computer, Inc. (shortened to Apple Inc., in 2007.)

The company is known as a brand that focuses on creativity and technology. Since its founding, the company has produced and sold some of the most used electronics worldwide. In 2019, Apple launched three new iPhones: iPhone 11 Pro, iPhone 11, and iPhone 11 Pro Max. It also came up with a unique version of MacBook Air, an updated Mac Pro, and the new Mac Mini.

2. Amazon.com Inc. (AMZN)

Jeff Bezos founded Amazon in 1994 as a site that only focused on selling books. Amazon did not go public until 1997, and each share went for $18 and had a market cap of around $438 million. Today, Amazon is the one company that every business is looking to beat, but they have a lot of work to do to get there.

3. Alphabet Inc. (GOOG)

Google is a subsidiary of Alphabet Inc., which has grown very quickly over the years. The company grew fast and acquired platforms such as YouTube, DoubleClick, and Android. It has a search market that is used in all parts of the world, which means its presence is impossible to ignore.

Google has used a lot of effort to ensure that the internet is made available in various parts of the globe. This is one of the best places to use mini options in case you don’t have enough capital to acquire 100 shares.

What Do You Need to Watch Out for With Mini Options?

Here are some of the things you need to watch out for if you intend to use mini options.

1. Lower Outlay

The greatest perk of mini options is that they need a very low cash outlay, which is around one-tenth of the amount required in the standard option. This makes it easier for investors to acquire shares without having to raise a lot of money.

2. Commissions Are Higher on a Percentage Basis

On the flip side, when trading mini options, at times, the commissions will add up. For instance, if a mini option requires that you use a flat fee of around $10, while the standard contract trades at $10, the commission will work out to 1%.

3. Best for Hedging Odd Lots

Most investors in the industry have odd lots; this means less than the required 100 shares. Most of the time, mini options can be used to hedge the exposures effectively and successfully.

Closing Thoughts

If you’re looking to acquire shares from a company, mini options make it easier to purchase stock. While this option is not available in many cases, you can still find companies that give you the chance to get started in trading stocks. You can start with a low amount of money to let you earn profits as you learn. Be sure to check out the pros and cons of mini options and only give it a try when you’re sure that it’s the best option.

Risk Disclosure

The risk of loss in trading futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. In considering whether to trade or to authorize someone else to trade for you, you should be aware of the following:

If you purchase or sell a futures contract, you may sustain a total loss of the initial margin funds and any additional funds that you deposit with your broker to establish or maintain your position. Thus, trading of futures may not be suitable for everyone and may involve the risk of losing part of your money, all of your money, or even more than all of your money.

The placement of contingent orders by you or by your broker, such as a “stop loss” or “stop limit” order will not necessarily limit your losses to the intended amounts, since market conditions may make it impossible to execute such orders.the high degree of leverage that is often obtainable in futures trading can work against you as well as for you. The use of leverage can lead to large losses as well as gains.

Futures prices can be highly volatile and unpredictable. Price movements of futures contracts can be influenced by political, economic and many other factors which are outside of a trading system’s or your broker’s control. No assurance is given that a customer will not incur substantial losses. Futures trading is highly leveraged. The low margin deposits normally required in futures trading permit an extremely high degree of leverage. Accordingly, a relatively small price movement in a futures contract may result in immediate and substantial loss to an investor. Like other leveraged investments, futures transactions may result in losses in excess of the amount of money invested.

Our trading systems are dependent to a significant degree on the proper functioning of the computer systems used to generate trading signals. Accordingly, systems failures, whether due to third party failures upon which such systems are dependent or the failure of the broker’s hardware or software, could disrupt trading or make trading impossible until such failure is remedied. Any such failure, and consequential inability to trade (even for a short time), could, in certain market conditions, cause a client’s account to experience significant trading losses or to miss opportunities for profitable trading.

The trading systems offered here are highly technical. The profitability of trading under these systems depends on, among other things, the occurrence of significant price trends which are sustained movements, up or down, in futures prices. Such trends may not develop; there have been periods in the past without price trends. No assurance can be given that these methods will be successful in the future, or that investment results will be similar to those achieved or illustrated in the past. Although every attempt is made to ensure the accuracy of illustrated results of our trading system, we cannot guarantee such, due to inaccuracies and fluctuations in data or errors in calculation. There are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. Another one of the limitations of hypothetical trading is that such trading does not involve financial risk and no hypothetical trading record can completely account for the impact of financial risk in actual trading.

Prior to buying or selling a futures contract, an investor will need a broker, and you must meet suitability requirements in order to trade these specific instruments. By accepting this disclaimer you are acknowledging the risks involved in trading the futures markets and are also acknowledging that you, the subscriber, and not trb futures llc, are solely responsible for any losses, financial or otherwise, as a result of using our trading systems. Trb futures llc shall under no circumstances be liable for any lost profits, lost opportunities, misstatements, or errors contained within these pages. You also agree that trb futures llc will not be held liable for data accuracy, server problems, or any special or consequential damages that result from the use of, or the inability to use, any or all of the materials published on our website. You agree to hold trb futures llc harmless for any act resulting directly or indirectly from this site, its data, content, materials, associated pages and documents. You agree to defend, indemnify and hold us and our affiliates harmless from any and all claims, liabilities, costs and expenses arising in any way from your use of any services provided by trb futures llc. Trb futures llc provides the information, services and products on this website “as is” without warranties of any kind. In no event shall trb futures llc, its managers, agents and employees be liable for any loss or injury, direct or indirect, incidental, consequential, special or exemplary damages, or any damages whatsoever arising from the use or performance of this website or from any information, services or products provided through this website.

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