Monday, May 27, 2013

mini-options are a smalldog investor's friend

from time to time i feature a position in my portfolio. here is my aapl position:

short a mini-put on aapl
mini-options control 10 shares of an underlying equity instead of  the usual 100. they are brand new and are only available on 5 equities (goog, aapl, amzn, spy and gld) other than the multiplier being different they look and price exactly the same, you just need to get used to mentally shifting the decimal 1 position instead of 2. my position statement says that i sold this option for $2.93 which means i collected $29.30 for the allocation of $4,350 of buying power in my ira for this week (annualized return of 35%.) the regular option would 10 times all of that but the buying power hit would not conform to my size restrictions. this is a position that i plan to roll week-to-week. mad-money host jim cramer is always saying one should divide by 10 when thinking about these high priced stocks and now there's a mechanism to do just that.

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