If you own less than 100 shares of say Apple Inc. (NASDAQ:AAPL) and were hoping that one day you could start selling some covered calls to earn some income against your shares, well, you are in luck, the Option gods have answered your prayers. On Mar. 18, the Chicago Board Options Exchange (CBOE) started offering a new product called mini-options. Mini-options were created with the retail investor in mind, providing for a more economical options product for investors with an odd-lot of shares (less than 100 shares) on high priced stocks. In this whole new world of options, you may hear option pundits on CNBC or Bloomberg throw out new nomenclature and phrases such as “selling some upside mini-calls” or “hedging with mini-puts.”
What are Mini-Options?
Mini-options will represent a derivative of 10 shares of an underlying security, versus a standard option’s contract which represents a derivative of 100 shares mini-options will have the same expiration dates and same strikes as standard options. Only five stocks will be in the initial offering and all are priced over $150, where trying to execute the associated income and hedging option strategies is expensive and out of reach for most retail investors. Here is the initial list:
Apple Inc. (NASDAQ:AAPL)
Apple Inc. (NASDAQ:AAPL) has been falling like a knife since its September 2012 high of $705, down over 30%. The company has missed on recent earnings, and growth is slowing. However, the company has recently reported record revenue in the last quarter, led by the all-time quarterly high of iPhone and iPad sales. The powerful global brand is 2nd only to The Coca-Cola Company (NYSE:KO), and for a technology company, pays out a very healthy 2.4% dividend yield. The latest downturn provides a value opportunity for a bullish investor to accumulate an Apple position using mini-options.
Google Inc (NASDAQ:GOOG)
Google Inc (NASDAQ:GOOG)’s stock has been flying high hitting a recent peak of $844. In their last earnings, Google Inc (NASDAQ:GOOG) announced that its “bread and butter” paid clicks metric strongly increased due to rising sales trends of tablets and smart phones, leading to more users doing online searches. Its Android operating system and legion of smart phones are increasing market share. Google Inc (NASDAQ:GOOG) retail stores are due in late fall to coincide with the Christmas season for a single place to sell Android phones and chrome hardware. In the coming month, Google X Lab will be announcing its next great innovation. The company is running on all cylinders. Google is a long term buy and is ripe to use mini-options to build a position.