Even More Options for Apple Inc. (AAPL), Amazon.com, Inc. (AMZN), and Google Inc (GOOG) Investors

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What it means for you
Investors also stand to benefit in the form of increased flexibility. Not only will investors soon be able to purchase contracts that don’t break the bank, but the mini-options will also provide new choices with hedging risk.

Covered calls are probably the most commonly used form of hedging for a long stock position, where an investor owns shares but sells a call against those shares. If shares are above the strike upon expiration, the investor is obligated to sell those shares at that strike, but if shares are below the strike price, then the contract expires worthless and the investor keeps the premium initially received. The relatively conservative strategy is a reliable way for investors to generate income on stocks that don’t pay dividends.

With round lots of Apple, Google Inc (NASDAQ:GOOG), and Amazon.com, Inc. (NASDAQ:AMZN) costing $43,000, $84,000, and $28,500, respectively, based on the prices above, those popular stocks have always proven prohibitively expensive many investors seeking a covered call position. With the new contracts, investors can sell a call contract that covers $4,300, $8,400, and $2,850 worth of stock instead, respectively, or increments thereof. That’s much more approachable.

These new mini-options are a win for everyone.

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The article Even More Options for Apple, Amazon, and Google Investors originally appeared on Fool.com and is written by Evan Niu.

Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Amazon.com, Apple, Google, and TD AMERITRADE. The Motley Fool owns shares of Amazon.com, Apple, and Google.

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