Weekly Strategy Discussion

The Weekly Strategy Discussion is designed to assist individuals in learning how options work and in understanding various options strategies. Options involve risk and are not suitable for all investors. The strategies discussed are for educational and illustrative purposes only, and should not be construed as an endorsement, recommendation or solicitation to buy or sell securities. Commissions, taxes and transaction costs are not included. Please contact a tax advisor for the tax implications involved in these strategies.

Mini Options and a Covered Call


Example:               You own 60 shares AAPL trading at $442.80 

Outlook:                You are neutral to moderately bullish on AAPL over the next few weeks and are OK with a stock sale price of $455

Possible strategy: Sell 6 mini April AAPL7 455 strike calls $7.50

 

At Expiration:

1) If AAPL above $455 at expiration:

         60 shares AAPL called away at effective price of $462.50

2) If AAPL below $455 at expiration:

         AAPL7 option expires; you keep $7.50 and AAPL shares

3) If AAPL below break-even ($435.30)

    Losses will occur


In Summary: Mini options have the same strikes, expirations and bid/ask pricing as the standard contract, but deliver only 10 shares of the underlying security instead of the standard option which represents 100 shares. Mini options are currently available on: AMZN, APPL, GOOG, GLD and SPY.

  VIX Snapshot

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