2013issue C0665
Odd-lot mini-options for covered calls, puts, and collars
A standard listed equity option controls 100 shares. A mini-option controls 10. This archive case shows covered-call writing, a protective put, and a collar as one-to-one overlays once the listed unit matches a high-priced 10-share holding.
- A one-to-one covered call, protective put, or collar needs the option share unit to match the stock lot.
- Mini-options control 10 shares and were listed on a short set of higher-priced names so holders of fewer than 100 shares could overlay a matching contract.
- On 10 shares, one mini-call, one mini-put, or both together implement the usual covered-call, protective-put, and collar designs.
- Vertical and horizontal spreads remain available on mini-options at one-tenth the notional scale of a regular contract.
The option unit has to match the stock lot
A standard listed equity option controls 100 shares. A holding smaller than that lot cannot be paired with one regular contract as a one-to-one overlay.
A mini-option controls 10 shares and is one-tenth the share unit of a regular contract. Mini-options were aimed at holders of fewer than 100 shares of higher-priced stocks who otherwise could not overlay a standard 100-share contract on an odd lot.
A CBOE pilot on five names
Mini-options began as a CBOE pilot on March 18, 2013 and were listed only on AAPL, AMZN, GOOG, GLD, and SPY.
Mini-options used the same strike prices and expiration dates as the matching standard-size options on those names.
Covered call, protective put, and collar on 10 shares
Covered-call writing on 10 shares can be implemented by selling one matching mini-call. In the archive illustration, a one-month 800-strike mini-call collected 30 points, which the writer keeps if the stock is unchanged at expiration. Upside above 800 is given up if the stock is called away.
A protective put on 10 shares can be implemented with one mini-put. The illustration buys a one-month 800-strike mini-put for 30 points, or 300 dollars, against an 8000-dollar 10-share position, creating a right to sell at 800 if the stock falls.
A collar on the same 10-share lot buys the mini-put and sells the mini-call together, combining the put floor with the short-call upside cap.
The same strategy families, one-tenth the scale
The same strategy families used on standard options, including vertical and horizontal spreads, remain available on mini-options at one-tenth the notional scale of a regular contract.
All readings on this track · 19 readings
- 2002Rebuilding a long-stock book with calls, puts and collars
- 2004Constructing protective collars and reading cheap premia
- 2004Protective collar, straddle exits, and index settlement
- 2005Collar and backspread construction as a pairing problem
- 2006Protective collar, net delta, and implied volatility
- 2007Interest as a sizing filter on collared stock
- 2008Collar versus bull call spread: capital and inventory
- 2008A long-stock case that sizes cash risk, then stays open with a protective put, covered calls, and a collar
- 2008Assignment as a planned handoff from put spread to collar
- 2008Protective collar rolls and straddle entry in extreme volatility
- 2010A margin call is a late exam in position size
- 2011Protective collars and covered calls after a volatility shock
- 2011Mid-life butterfly and collar adjustments across range and correction
- 2012Stacking a 1-by-2 overlay and a collar on underwater stock
- 2013Odd-lot mini-options for covered calls, puts, and collars
- 2014Zero-debit call-ratio repair for a broken long stock
- 2014An open collar funds the puts without capping every share
- 2018A protective collar as an event-risk budget
- 2020Constructing position-level collars around unsold holdings