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The Round Rock Wealthbuilder's Meetup Message Board › Mini Option: Thouht this was interestin

Mini Option: Thouht this was interestin

AreJay
user 5664378
Georgetown, TX
Post #: 17
Mini Options: Are They the Right Size for You? Mini options are more affordable a way to incorporate option strategies on securities in your portfolio for a lower initial investment. While standard option contracts represent 100 shares of the underlying security, mini options reduce the size of the contract down to just 10 shares. Contract Specifications Mini options are now available for these five securities — Apple Inc. (AAPL), Google Inc. (GOOG), Amazon.com Inc. (AMZN), the SPDR S&P 500 (SPY), and SPDR Gold Shares (GLD). While mini options are one-tenth the size of the standard option contract remember that mini-options do not reduce the per share cost or price of options. Also keep in mind that available expirations, trading times, commissions, exercise and assignment fees are the same for mini-options as they are standard options contracts. Please review our commissions and fees here. Like regular options, you can lose the entire amount committed to a mini-options position in a relatively short period of time. Mini Option Contract Uses With prices of the five securities exceeding $100 per share, it may not fit your strategy to trade in 100-lot share amounts. For example, assume a stock trades at approximately $830 per share. A standard contract of 100 shares, controls $83,000 worth of the underlying asset. (This excludes commissions. Scottrade charges $7 per online trade, plus $1.25 per option contract.) This large commitment may have prevented many of you from utilizing options in your trading strategy. By comparison, a mini option controls just 10 shares, or $8,300 in this example, of the security. Mini options require less capital for a covered call strategy (selling calls against shares you already own). Under a standard option, you must own at least 100 shares of the underlying security for each covered call. In the example above, you would have to own $83,000 worth of the underlying asset. However, mini options allow you to use a covered call strategy with as few as 10 shares of the underlying security. Or $8,300 worth in this example. This lower requirement is a benefit to other option strategies as well, allowing you to fine-tune each strategy to meet your needs. For example, assume a 40-day at-the-money call on one of the five securities is priced at $28. It would require $2,800 to purchase one standard contract. This may be a relatively large allocation of your capital for a speculative trade. With a mini option contract, you can allocate as little as $280 to that same trade. This allows you to more closely match your desired exposure to the trade. Accessing Mini Options Mini options contracts will display under the option chains of the underlying security. You will not need to enter a special symbol. In Scottrader® Streaming Quotes and ScottradeELITE®, mini options display on the same chain as the standard contracts. The mini options strike prices are designated with an “M.” In the Scottrade® client website, the option chain will have a link called “MINIs” in the upper-left corner. You can click on the link to display the mini contracts separately from the standard contracts. View Graphic In other locations where an option symbol can be built, such as watch lists and the order entry window, you can select a mini option from the Strike Price menu. Mini option contracts are designated with an “M” next to the strike price in the list. View Graphic Whether you are new to options or a seasoned trader, mini option contracts can be an exciting new tool that helps traders of all sizes better match their options trading tactics with their overall trading strategies. For more information on trading mini options, please contact your local Scottrade team. Any specific securities or types of securities shown are for demonstration purposes only and should not be considered a recommendation or solicitation to invest in, or liquidate, a particular security or type of security. Investors should fully research any security before making an investment decision. Options involve risk and are not suitable for all investors. Detailed information on our policies and the risks associated with options can be found in the Scottrade Options Application and Agreement, Brokerage Account Agreement, and by downloading the Characteristics and Risks of Standardized Options and Supplements (PDF) from The Options Clearing Corporation, or by requesting a copy from your local branch office. Market volatility, volume, and system availability may impact account access and trade execution. Supporting documentation for any claims will be supplied upon request. 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. Consult with your tax advisor for information on how taxes may affect the outcome of these strategies. Keep in mind profit will be reduced or loss worsened, as applicable, by the deduction of commissions and fees.
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