Mini options are a relatively new product in the world of options trading. As the name suggests, they are a smaller version of the standard option contract. Specifically, these contracts represent only 10 shares of the underlying security rather than 100 shares. The goal of mini options is to give investors more flexibility in managing smaller, high-priced stock positions.
Let's find out when you might use them and how they work.
Why use mini options?
These options were primarily introduced to accommodate investors who own between 10 and 90 shares of certain high-priced securities. Mini options allow these investors with smaller positions to take advantage of option strategies that were previously unavailable.
For example, an investor who owns 10 shares of AAPL1 now has the ability to sell a covered call, purchase a protective put, or do both and collar the position. In addition, investors who don't have a position in these higher-priced securities may use mini options as a lower-cost way to gain exposure to these stocks. When considering long options as a substitute for stock exposure, however, keep in mind that stocks do not expire, may pay dividends, have voting rights and loan value, while options expire, have a much higher risk of 100% loss of principal, do not receive dividends, and do not have voting rights.
How do they differ from standard options?
There are two primary differences between standard and mini options:
Contract size: Mini options represent 10 shares of the underlying security, so exercising one mini option results in the delivery of 10 shares of the underlying security (long call holders receive 10 shares at the strike price and long put holders deliver 10 shares at the strike price).
Premium multiplier: The mini option premium multiplier is $10 rather than the standard $100. This means that the quoted price for a mini option is multiplied by $10 in order to determine the cost. For example, if the quote on a mini option is $5 by $5.10, you can expect to pay $51 ($5.10 × 10) to purchase one contract or receive $50 ($5 × 10) when selling one contract (not including commissions).
There are a few other minor differences to be aware of (discussed below), but otherwise mini options are very similar to standard options:
Comparison of mini options vs. standard options
|Shares deliverable upon exercise||100 Shares||10 Shares|
|Total value of contract||$500||$50|
|Total value of deliverable||$50,000||$5,000|
Source: Schwab Center for Financial Research.
Which stocks/ETFs trade mini options?
Mini options are currently only available on five securities. Remember that the main driver behind mini options is to provide flexibility for investors who own high-priced securities. Here are the underlying securities¹ for which mini options are currently available:
Google Inc. Class A (NASDAQ: GOOGL)
Amazon.com, Inc. (NASDAQ: AMZN)
SPDR S&P 500 ETF Trust (NYSE Arca: SPY)
SPDR Gold (ETF) (NYSE Arca: GLD)
Additional securities could be added to this list in the future (depending upon demand and regulatory approval). But right now the eligibility requirements are restrictive: The securities must be stocks or ETFs with a minimum share price of $100 with a three-month average option trading volume of at least 45,000 contracts.
What else do I need to know about mini options?
Here's some additional information about mini options to keep in mind:
- Price increment: Mini options are bought/sold at the same price increments on the underlying security as standard options. This means that options on AAPL, AMZN, and GLD trade in penny increments up to $3 and nickel increments above $3; options on GOOGL trade in nickel increments up to $3 and in dime increments above $3, while options on SPY trade in penny increments for all price levels.
- Commissions: The commission for buying or selling a mini option is the same rate as buying or selling a standard option contract: $8.95 + $0.75/contract. Keep in mind, however, that even though one standard option contract is theoretically equivalent to 10 mini option contracts, the commission cost will be greater to purchase 10 mini options.
- Mini option pairing: Mini options can be paired with stocks in a 1/10 ratio or with standard options in a 10/1 ratio. For example, 10 mini option contracts can be paired with 100 shares of stock or one standard option contract.
- Mini and standard option order entry: Investors can't combine order entry for mini and standard options.
How can mini options be identified?
Symbols for mini options have the same four primary components as their standard counterparts:
- Underlying security ticker
- Expiration date
- Strike price
- Call or put identifier
Mini option symbols can be distinguished from standard option symbols by the number 7, which is appended to the underlying security. Here's an example:
Mini options symbol: AAPL7 04/20/2013 500.00 C
If there's a corporate action (stock split, merger, etc.) and the mini option deliverable becomes something other than 10 shares, the number appended to the underlying component of the option symbol will be changed to an 8 or a 9 (example: AAPL8 04/20/2013 500.00 C).
At Schwab, mini options are labeled as adjusted options due to the fact that they have a non-standard deliverable and multiplier (that is, 10 instead of 100). This can also help you to identify mini options within our trading platforms—see below for examples of what mini options look like in the options chain of each trading platform.
Mini options are grouped by expiration date, and the non-standard deliverable and multiplier are indicated in parentheses to the right of the group's expiration date.
Contract Specifications (you can see this by clicking the arrow next to the option symbol.)
Mini options are located under their own tab, which is labeled with the mini option root symbol (example: AAPL7). The non-standard deliverable and multiplier are listed below the mini option tab.
Options are listed by strike price. Mini options can be identified by their root symbols (example: AAPL7).
The use of mini options gives options traders more flexibility in managing smaller share size positions with high prices.
1. All stock and option symbols and market data shown above are for illustrative purposes only and are not a recommendation, offer to sell, or a solicitation of an offer to buy any security.
I hope this enhanced your understanding of options. I welcome your feedback—clicking on the thumbs up or thumbs down icons at the bottom of the page will allow you to contribute your thoughts. (If you are logged into Schwab.com, you can include comments in the Editor's Feedback box.)