Mini Options: What Are They and How to Use Them

Mini options (or E-mini options) are options contracts that represent 10 shares of an underlying security instead of the usual 100 shares. They are popular with investors or traders who own less than 100 shares of a stock or exchange-traded fund. Mini options come with the same strike price that you find with standard options contracts; however, they are worth one-tenth the value of those contracts.

Mini options are appealing to certain traders due to their affordability and flexibility. Mini options make it easier for small investors or beginners to trade high-price securities with limited capital. Mini-option traders provide flexibility to traders by allowing them to manage large-cap US equity exposure. While they’re a good fit for newer traders, mini options can also work well for experienced traders who want to test out strategies with a smaller capital commitment for high-price stocks they’re interested in trading.

Keep reading to learn everything you need to know about mini options and how you can use them to your advantage, be you a newcomer to online trading or a seasoned trader who is looking for a way to test out new trading techniques.

What Are Mini Options?

The standard options contract represents 100 shares of an underlying stock or exchange-traded fund, but mini options are contracts that represent only 10 shares of a stock or ETF. They’re designed for newer traders who have limited capital and want to participate in trading high-priced securities or for experienced traders who want to use a smaller capital commitment to test out new strategies on high-price stocks.

Traders can find mini options listed on benchmark indexes. A few exchanges that carry mini options are ARCA, NYSE, and the CME Group. The premium for a mini option is only one-tenth the value of the standard options contract, but they have the same strike price. Another similarity is that the symbol for a mini option is the same as the standard options, but the number 7 is added to the end.

Figuring out how much the mini-option contract might be compared to its standard option contract counterpart is a simple matter of math and fractions. If you have a stock price that’s valued at $200, the mini options equivalent will be valued at $20. There’s quite a difference in scale between the two, with the mini options offering a way for investors to get exposure to high-priced stocks with a small capital commitment.

Benefits of Trading Mini Options

Mini options provide investors and traders from every skill level with opportunities to benefit financially, both through having the chance to test out strategies on high-priced stocks or ETFs and gaining exposure to these securities with limited capital. Check out the best benefits of online trading using mini options!

• Lower Cost: Due to mini options being only one-tenth the value of a standard options contract, traders can deal with these stocks and ETFs with a lot less capital and still gain exposure to these securities.
• Reduced Financial Risk: Because new traders and seasoned traders can deal with mini options with a smaller capital commitment, they enjoy the benefit of reduced financial risk in these investments. Traders only stand to lose one-tenth of their capital compared to a standard options contract.
• Accessibility for Smaller Accounts: Traders with limited capital, who wouldn’t usually be able to trade some of these high-priced stocks, can now gain exposure in these securities through mini options. Even experienced traders with more money to work with can take advantage of the smaller capital commitment mini options offer and test out strategies on high-priced stocks.
• Opportunity to Diversify Strategies on a Smaller Scale: As mentioned in the last point, mini options contracts let traders test out strategies with a small capital commitment. It’s not a terrible alternative to using a demo account because of the smaller amount of risk involved. You’re only losing one-tenth of the standard option contract in your worst-case scenario.

Key Features of Mini Options

Let’s get into the key features of trading mini options that investors should be aware of before diving into the action. Learn how the pricing structure is set up and how the contact size and multiplier come into play. We’ll also discuss the underlying securities that qualify for mini options like stocks and ETFs that are higher-priced than many others you’d find with standard contracts.

• Underlying Securities: Mini options are largely limited to only a handful of high-priced stocks and exchange-traded funds, including Google, Amazon, SPDR Gold Trust, and the SPDR S&P 500. It’s these popular, high-priced stocks that have the underlying securities that qualify for mini options.
• Contract Size: Mini options contracts represent 10 shares of underlying security instead of the usual 100 shares, making them a great go-to for investors or traders who own less than 100 shares of a stock or exchange-traded fund. If you have a stock price that’s valued at $200, the mini options equivalent will be valued at $20.
• Multiplier: Mini options premiums have a multiplier of 10, which varies from standard options contracts, which contain a multiplier of 100. If the mini-contact is quoted at $10, this ultimately means $100 per contact because you take $10 and multiply it by 10.
• Pricing Structure: The price of the mini option is proportionally lower than the standard options contract due to its lower multiplier of 10 compared to 100 (mini options have a smaller number of shares per contract).

If a standard stock is trading at $100, the call options will come with a strike price of $150 which would cost $5 per contract. This is representative of the standard stocks that come with the standard 100 shares. On the other hand, mini options for the same stock or ETF will come with the same strike price of $105, but they will come at a rate of $0.50 per contract which represents the mini options size of 10 shares.

How Mini Options Are Used in Trading Strategies

Not only can traders gain exposure to certain high-priced stocks and ETFs using mini options, but these smaller options contracts can also be used in trading strategy in ways that might not be readily apparent on the surface. This section will dive into some of the best ways that traders can leverage mini options to test strategies and techniques for these high-priced stocks.

Hedging for Small Positions

Traders can use these smaller contracts to protect a smaller investment portfolio from potential price fluctuations. Because mini options cover only 10 shares of the underlying security, they can act as insurance against significant losses that investors might incur. Mini options can offset the price movements in the opposite direction which creates the conditions for investors to put hedging strategies into practice with a smaller amount of capital. Mini options make hedging for smaller positions possible in a way that just cannot happen with standard options contracts.

Speculating on Price Movements with Less Capital

Traders can use mini options to trade using a smaller amount of capital and speculate on the price movements of options on high-priced stocks and ETFs like Google or Amazon. Trading options is made much easier in the case that you don’t have the money to afford trading standard options contracts. Mini options allow investors with limited capital to trade options and make money on price movement speculation using strategies like straddles or strangles.

Practice and Education

This lets traders from all skill levels and backgrounds test out strategies on these mini options without having to risk a lot of their capital in the process. Speculating on price movements using mini options is a decent alternative to using a trading app’s demo account.

Mini Options vs. Standard Options

To give you a clear picture of mini options and standard options, we’ve included a side-by-side table comparing these two types of contracts. Learn how they are the same and where they differ in terms of contract size, cost, risk, flexibility, and other important factors.

Trading standard options contracts are preferable for advanced traders or those who have the capital to back up such investments. Because of the increased risk they carry, standard contracts are a better fit for traders or investors who know how to navigate the market effectively and still make a profit in the long run.

Mini options are great for beginners or traders with little money to work with. They only represent one-tenth of the standard contract, so they involve less risk and don’t require as much capital backing on the part of the investor. Mini options are great for advanced traders who would like to use these smaller trades to practice strategies before trying them on standard contract trades where there’s more risk involved.

Risks Associated with Mini Options

What kind of risk do you run trading mini options? Although you’re not risking as much capital as you would with standard options contracts on stocks and exchange-traded funds, there are still some risks that investors run with mini options, and it’s worth noting them so you know what to expect in the worst-case scenario.

Liquidity Concerns

Mini options come with a wider bid-ask spread and have smaller open interests. This means that mini options have much lower liquidity, at least compared to standard options contracts. Mini options are, therefore, harder to sell quickly to buyers without affecting their market price.

Limited Availability of Mini Options

There are only five stocks that feature mini options contracts on the underlying asset, which include the following:

• Amazon (AMZN)
• Apple (AAPL)
• Google (GOOG)
• SPDR Gold Trust (GLD)
• SPDR S&P 500 (SPY)

Mini options might be available on benchmark indices, but they aren’t available with many major companies. This creates a risk with investors’ portfolios if they deal exclusively with mini options. These portfolios aren’t diversified enough to be a viable trading option for investors. They won’t be able to produce the growth needed for traders or investors to turn a profit.

Potential for Higher Relative Transaction Costs

Standard options contracts have some commonalities with mini option contracts and one of those is the commission being the same per contract. The smaller contract size you find with mini options means that the commission represents a larger percentage of the trade’s overall value. What this means is that the transaction cost for smaller positions is proportionally higher. This impacts the bottom line for investors using mini options more so than for those using standard contracts because a larger percentage of their limited capital is eaten up by the commissions and other fees.

Popular Stocks and ETFs Offering Mini Options

Mini options with physical settlement began trading in 2013 on the Chicago Board of Options Exchanges, and there are only five securities that are associated with these smaller contracts.

• Amazon (AMZN)
• Apple (AAPL)
• Google (GOOG)
• SPDR Gold Trust (GLD)
• SPDR S&P 500 (SPY)

For the most part, the symbols of the standard contract versions of these five securities are the same, but the mini options contracts have the number 7 at the end of the symbol to differentiate them from the standard contracts. For instance, Google’s symbol would be stylized as GOOG7 for mini options.

Mini options have a physical settlement. What does this mean? The actual shares may have to be delivered if the position was not closed before the time of the expiration date.

How to Trade Mini Options

Follow the step-by-step guide below to buying and selling mini options:

1. When you’re using a trading app, you can identify mini options by the number 7 being at the end of the underlying security symbol.
2. Select the stock you want to trade that offers mini options contracts. You can choose between Amazon (AMZN), Apple (AAPL), Google (GOOG), SPDR Gold Trust (GLD), or SPDR S&P 500 (SPY).
3. Next, analyze the market conditions and find out what the implied volatility is signaling. Once you get an idea of the market sentiment, you can figure out which trading strategy or technique will work best for the current situation.
4. Choose the trading strategy that you’d like to use. A few common techniques are covered calls or protective puts, but simply choose one that works best for your goals.
5. Select a strike price that works best for the price prediction you had in mind. Then choose the expiration date based on the time horizon you desire.
6. Include the option types, strike price, and expiration date when placing your order. Indicate how many mini-option contracts that you would like. Remember that they only represent one-tenth the value of a standard contract.

Factors to Consider Before Placing a Trade

• Overall Investment Goals—If your goal is to use mini options to practice trading strategies, this can be a great short-term tool to perfect your techniques and not use up too much capital in the process. Trading mini options might not be the best long-term trading goal for investors considering the limited securities available and the fact that using such small amounts of capital can make it difficult to build up a robust portfolio that delivers profit.
• Taste For Risk—How open are you to risking your capital to get ahead in trading? If you’re hesitant to sink a ton of money into any single trade, you might try out mini options, which are one-tenth the worth of a standard options contract. However, you run the risk of higher relative transaction costs working with such small amounts of capital when trading mini options.
• Trading Style—Consider your personal trading style. If you’re someone who likes the prospect of hedging options on high-priced stocks, mini options could be a good choice for you. Plus, they let you speculate on price movements with only a small amount of capital.
• Liquidity—Keep liquidity in mind, your ability to enter and exit positions quickly. This is harder to accomplish with mini options compared with standard contracts, so don’t be taken aback if you cannot sell your positions quickly. And if you can, there’s a chance that it could come at the cost of affecting its market price.
• Commissions Structure—Before trading mini-options, check with your online broker to fully understand the cost per contract and how much it will cost you to conduct these mini-option trades. Make sure that they’re worth your time and that you can secure some kind of profit.
• Risk Management—Like any other form of online trading, it’s key to utilize sound risk management techniques to lock in profit when needed and to cut losses before they get too out of hand. Understand your potential profit or loss scenarios and implement take-profit or stop-loss orders accordingly.

Tips for Trading Mini Options Successfully

What are a few tips and tricks for getting ahead when trading mini options to ensure you don’t make any careless mistakes along the way? We’ve provided some great tips for trading mini options successfully if you’re just starting. Get a leg up and learn from the experiences of those who have already done it before.

Start Small and Build Experience

One of the best approaches when trading mini options is to begin small and gain some experience before taking things to the next level. It’s the nature of mini options to use less capital, but you also have control over how many contracts you can purchase. Perhaps begin with a smaller number of contracts while learning the ropes, and then increase the orders as you gain confidence with your experiences. This can help you avoid unneeded losses which could put a dent in your available capital.

Research Liquidity and Bid-Ask Spreads

Before trading mini options, it’s key to look into open interest and the bid-ask spreads for each position you trade to find out how quickly or slowly it would take to sell these positions without losing too much in market value. Looking into this data can, more or less, give investors an idea of what to expect when they look to sell these positions. They can begin putting together a plan to lock in a profit by selling at the right time for the right price.

Practice Covered Calls or Protective Puts

As mentioned a few times in this guide, mini options with 10 shares are a terrific tool to practice trading strategies and techniques that might not be great to practice with using standard options contracts with 100 shares. Take advantage of these smaller contracts and use a smaller amount of capital to get exposure to these securities and practice trading strategies with little risk involved!

FAQs about Mini Options

Find out what our customers and readers have most commonly asked about trading mini options. If you read this FAQ section, you can get the main points and highlights of what we’ve discussed in this review of mini-options trading.

What Is the Difference between Mini and Micro Options?

Mini options are contracts that are worth ten percent of standard options contracts, while micro options are contracts that are worth ten percent of mini options. Mini options are good for beginners with limited capital and experienced traders who would like to practice trade strategy with limited risk. Micro options are most geared toward newcomers who have no experience, providing them with the learning experience they need.

Are Mini Options Available for All Stocks?

Mini options are only available for Amazon (AMZN), Apple (AAPL), Google (GOOG), SPDR Gold Trust (GLD), or SPDR S&P 500 (SPY). Mini options have a physical settlement, which means the actual shares may have to be delivered if the position was not closed before the time of the expiration date. Mini options with physical settlement began trading in 2013 on the Chicago Board of Options Exchanges.

How Are Mini Options Priced?

As mini options represent a tenth the size of a standard options contract, they are priced by multiplying the quoted price of the mini option by 10. Traders are only buying or selling 10 shares instead of the standard 100 shares you find with regular contracts. This means that the cost of entering a mini-option position is much lower, making it more accessible to investors with little available capital.

Can I Use Mini Options for Covered Calls?

Covered calls are some of the best trading strategies to use when dealing with mini-options contracts. Traders can generate income on a small portfolio. Using covered calls, this additional income is from the premiums received from selling a call option. At the same time, these trades limit risk.

Try Out Mini Options Today!

Regardless of the trading experience you have, you can use mini-options contracts to your advantage. There are plenty of advantages to opting for these smaller contracts instead of the standard contract of 100 shares, including the following:

Advantages of Mini Options

• Mini options are one-tenth the value of a standard options contract, traders can deal with these stocks and ETFs with a lot less capital and still gain exposure to these securities.
• Traders only stand to lose one-tenth of their capital compared to a standard options contract. The smaller capital commitment lets traders enjoy the benefit of reduced financial risk in these investments.
• Mini options offer great accessibility for traders with limited capital. These smaller contracts make it possible for smaller accounts to deal with high-priced stocks and gain exposure to these securities.
• Trading mini options are a great alternative to using a demo account because of the smaller amount of risk involved. You’re only losing one-tenth of the standard option contract in your worst-case scenario. It’s a great opportunity to diversify strategies on a smaller scale.

Unique Features of Mini Options

• Mini options are largely limited to only a handful of underlying securities: Amazon (AMZN), Apple (AAPL), Google (GOOG), SPDR Gold Trust (GLD), or SPDR S&P 500 (SPY).
• Mini options contracts represent 10 shares of underlying security instead of the usual 100 shares, making them a great go-to for investors or traders who own less than 100 shares of a stock or exchange-traded fund.
• Mini options premiums have a multiplier of 10, which varies from standard options contracts, which contain a multiplier of 100.
• The price of the mini option is proportionally lower than the standard options contract due to its lower multiplier of 10 compared to 100 (mini options have a smaller number of shares per contract).

We’d encourage anyone reading this guide to consider mini options for specific trading goals. If you’re a newer trader looking to gain experience and not put much capital at risk, check out mini options with their small capital requirement and exposure to high-priced securities like GOOG or AMZN. If you have considerable experience in options trading already, you can still use mini options contracts to practice strategy with only a small capital commitment per trade.

Head over to OptionsTrading.org to discover which broker platforms offer mini-options and to access further guides on options trading strategies that could work well for you when trading using mini-options contracts!