How can an investor distinguish between a mini option and a standard 100-share contract?
The option symbol for mini options will be the underlying symbol followed by the number 7; for example, XYZ7. An investor might find an XYZ7 400 strike quoted next to the standard 100-share XYZ 400 option with the same expiration date. The XYZ7 is the mini option. If there is a corporate action, the symbol will be further modified and appended with an 8 such as XYZ8.
What is the exercise style of mini options?
Like the standard 100-share contracts on the same underlying, mini options are 10-share contract American-style options and can be exercised at any time up to expiration at the discretion of the option holder.
If an investor buys one XYZ7 call mini option at a 250 strike price for a quoted price of 4.30, what would it cost?
Different from their standard 100-share-deliverable counterparts, mini options have 10 shares as the underlying deliverable. The contract multiplier used for strike prices and premiums is 10. Not including commissions and fees, the buyer in this example would pay 4.30 x $10 = $43. However, the buyer of a standard option with a 100-share deliverable, a quoted premium of 4.30, and a multiplier of 100 would pay $430.
If an option holder elects to exercise a 250 XYZ7 call mini option, what would the investor pay and receive? What about a put exercise at the 250 strike?
The investor that exercises a call pays $2,500 and receives 10 shares of XYZ. The contract multiplier used for strike prices and premiums is 10. For a put exerciser, the investor delivers (or puts) 10 shares of XYZ and receives $2,500. There may be fees for exercises and assignments which is why it is important to consult with your brokerage firm.
I hold 45 shares of XYZ in my account. Can I use mini options to write covered calls?
Since each mini option delivers 10 shares, an investor could write up to four mini call option contracts. If that investor received an assignment on those four mini call options, the assignee would deliver 40 shares of the underlying. They could choose to keep the other five shares or sell those on the open market. For the investor holding 45 shares of stock to be considered covered, they could write up to four mini call contracts.
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