Mini options are option contracts that represent 10 shares of an underlying security, unlike a standard option contract which represents 100 shares. The Securities & Exchange Commission has approved mini options on five securities: Apple Inc. (AAPL), Google Inc. (GOOG), Amazon.com Inc., SPDR S&P 500 exchange-traded fund (SPY), and SPDR Gold Trust exchange-traded fund (GLD).
Trading Mini Options
As with standard option contracts, you can use mini options to participate in individual stock or market movements without owning any underlying position by buying mini option calls and puts. The total value of a mini option contract, or premium, is one-tenth the value of a standard contract. Also, a mini option contract has a premium multiplier of 10, rather than 100 for a standard contract. So a mini option contract with a bid/offer price of $5 has a total contract value of $50. A standard option at $5 has a total contract value of $500. You are able to participate in options trading on these high-priced securities with less capital at risk than is required for standard contracts.
Also, mini options allow anyone with less than 100 shares to use a covered call strategy in any of the five securities mentioned above. With mini options you can sell one mini contract for every 10 shares held in the account. This allows covered call positions to be created in smaller accounts using less capital. For example, if AAPL is selling for $500 per share, you would need to own $50,000 worth of AAPL (100 shares x $500 per share) before being able to write a standard covered call. With a mini option, you could sell a covered call on a smaller position valued at only $5,000 (10 shares x $500 per share). These examples do not factor in the standard options commission of $7 plus $1.25 per contract which is applicable to all options trades regardless of contract size.
In addition, you can combine selling standard and mini options to execute a covered call* strategy over mixed-lot positions (positions with greater than 100 shares not divisible exactly by 100) in one of the five underlying securities. For example, if you have a 150-share position, you can sell one standard call (100 shares) and five mini calls (5 x 10 shares = 50 shares) to execute a covered call strategy.
How Mini Options Work
- Most aspects of a mini option are comparable to a standard option in the same underlying security, including strike prices, and bids and offers.
- Mini options are American-style expiration and have weekly, monthly and quarterly expirations.
- Mini options have the same quote and trade price increments as standard options.
- The minimum trade size for a mini option is one contract with puts and calls representing 10 shares of the underlying security.
- A mini option series will be added if the underlying security trades above $90 per share. If the underlying trades below $90 for five consecutive days, no additional series will be added.
- There are no special margin requirements for minis. A position that has 10 mini calls may be offset by one standard call.
Mini Options at Scottrade
Mini options can be traded online across all of Scottrade's platforms. There are various ways to identify mini options throughout the platforms. If you perform a search within the Quotes & Research tab within the client website for any of the five securities listed above and click on the “Options Tab” you will see a link called “MINIs.” Clicking on that link opens the mini options chain for that security. Mini options are also identified with the “MINI” identifier elsewhere on the client website, including the Overview tab on the Positions page, statements, confirmations, open and completed orders, positions, watchlists, alerts, trades, account history and order status.
In ScottradeELITE and Scottrader Streaming Quotes, mini options are identified with the letter “M” next to the strike price to differentiate them from standard 100-share option contracts.
*The covered call option strategy may help generate income and offer limited downside protection, but does not provide full downside protection and may limit profit potential.