Mini Options Making Waves

Traders have been calling for mini options as a way to play high-priced stocks.

   

The new mini options debuted this week on Google (NASDAQ:GOOG), the SPDR Gold Trust (NYSE:GLD), Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL) and the SPDR S&P 500 ETF (NYSE:SPY).

While I think they could potentially be something to explore, I tell you why I’m steering clear for now.

Video Transcript

For those of you who may not know, there’s a new product introduction for mini options, so stocks like AAPL, for example, where you could spend $18,000 buying an AAPL contract because it’s such an expensive stock, they’ll be cutting those into tenths. So you’ll be able to trade mini options on those kinds of stocks at a tenth of the price of regular options.

I don’t have any info myself – I always step back from those new product introductions and let everybody else learn the hard lessons first and see how they work. The only thing I’m really concerned about that, honestly, is liquidity. What does liquidity look like on those?

Sometimes they introduce options products and everybody gets excited about them, but they just don’t attract any interest. Like currency index options, which came in a couple years ago. They just never got any interest. Nobody likes them.

In fact, everybody trades options on currency ETFs rather than the currency index options, but I think the currency index options would be a better product, but they just never got a lot of traction.

I’m optimistic about the mini options, but I think there’s some cause for concern so early on.

Investor Place advisors John Jagerson and S. Wade Hansen are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news.  Get in on the next trade and get 1 free month today by clicking here.


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