Warrior Trading Blog

Mini Options: Great For Trading Higher Priced Stocks

Mini options

What Are Mini Options?

Mini options are an options class that carries 10 shares of an underlying stock or exchange-traded funds, rather than 100 shares as is the case with traditional options.

U.S. options exchanges introduced mini options in March 2013 on five popular expensive securities including Google and Apple stocks. Every listed mini option has a unique symbol to facilitate the vast array of trade orders that flow through the mini options market every day.

The option symbol for mini options is comprised of the same components as the standard one, except the underlying symbol is followed by the number 7. For example, the mini option series for Apple starts with AAPL7 while that of Amazon starts with the identifier AMZN7.

Why Were Mini Options Introduced?

Higher stock prices can make it sometimes tough for small investors to even afford a handful of shares. That is why mini options were created to boost interest among small investors because many of them lack the capital to first buy 100 shares of high-profile stocks or even the options themselves.

This new breed of options was meant to offer the opportunity for investors who own less than 100 shares of higher-priced underlying stocks to implement the same options strategies that exist for the standard options with much less capital.

The contract multiplier used for premiums and strike prices in mini options is 10. For example, if an investor buys one ABC7 call mini option at a 300-strike price for a quoted price of 5.50 the buyer would pay 5.50 x $10 = $55 (not including fees and commissions).

However, a buyer of a standard option with a 100-share deliverable, a multiplier of 100, and a quoted premium of 5.50 would pay $550.

What Stocks Have Mini Options?

There are a handful of companies that offer mini options. Below are three of the more popular ones.

  1. Apple Inc (AAPL7)

Apple is undoubtedly one of the most desirable companies in the world. The iPhone maker was founded in 1976 by Steve Jobs, Ronald Wayne and Steve Wozniak to design and sell personal computers. It was incorporated as Apple Computer, Inc in 1977, and was renamed as Apple Inc in 2007 to reflect its shifted focus toward consumer electronics.

Apple prides itself on being a brand at the intersection of technology and creativity. The company has developed some of the most used, and loved electronics in the world. In 2019, Apple three new iPhones: iPhone 11, iPhone 11 Pro and iPhone 11 Pro Max. The company also introduced a new version of MacBook Air, a new Mac mini, and an updated Mac Pro.

  1. Amazon.com Inc (AMZN7)

Few people outside of Amazon realize Amazon’s historical scope of innovation. Amazon was founded by Jeff Bezos in 1994 as a website that only sold books.

The company went public in 1997, with its shares priced at $18 apiece and a market cap of roughly $438 million. Today, it’s the disruptor to beat in everything from e-commerce and logistics to cloud computing and hardware.

Analysts believe that Amazon is only scratching the surface of its future opportunity, given it has only captured about 0.5% of its addressable market.

  1. Alphabet Inc (GOOG7)

Google, a subsidiary of Alphabet Inc, began with a clearly superior search product in 1998 and expanded to dominate internet advertising globally. The company went on to acquire YouTube, Android, and DoubleClick for what now seems like pocket change. Its search market share is dominant in most nations around the world.

Google has used its vast cash flows to invest heavily in all sorts of diverse areas including bringing internet access to many parts of the world, leading autonomous car advancements, mapping the entire world down to the street, leading cutting-edge artificial intelligence, and scanning every book in the world.

Although some of its bold bets are likely to fail, some of them may pay off in a huge way over the long term.

Final Thoughts

Although mini options are a suitable tool for hedging and trading highly-priced shares, they are only available on a handful of stocks.

That means they will continue to have a limited following until they are offered on a much wider range of ETFs and stocks.


Leave a Reply

Your email address will not be published. Required fields are marked *