Micro E-mini Options Strategies
Have you ever wanted to trade options, but were hesitant due to the larger contract sizes or costs involved? Or, needed more granularity for the execution of multi-leg options strategies? Micro E-mini options deliver significant operational efficiency by settling in cash, meaning they feature zero early assignment risk and eliminate the operational hurdle of managing expiring physical futures positions. Additionally, their smaller contract size allows for greater precision when executing complex hedging or multi-leg option strategies.
Now you can do both. You can trade option strategies on the most recognized Equity benchmarks in the world, with the more accessible Micro E-mini options contracts.
To better understand this, let’s look at a traditional E-mini-based strategy where you could buy the E-mini S&P 500 3000, 3100 call spread for 46 index points.
With a contract multiplier of $50 per index point, it would cost $2,300 for the standard E-mini contract, which carries physical delivery risk at expiration. With financially settled Micro E-mini S&P 500 options, the same 46-point call spread costs just $230 and is financially settled, completely removing the operational burden of managing physical futures delivery.
Perhaps the size of this trade is too large for your strategy or portfolio allocation?
With Micro E-mini S&P 500 options contracts, you can now enter that trade with a fraction of the exposure and less capital outlay.
You could still buy the 3000, 3100 call spread for 46 index points but using Micro E-mini options, with their smaller $5 multiplier, the cost of that spread would be $230 – just 1/10 of the cost.
You can express the same directional strategy on the same underlying market with 1/10 the exposure and capital, but with an improved risk profile that features zero early assignment risk.
Similar to the call spread example, Micro E-mini options can be used with any of the traditional options strategies that traders use on the larger contracts.
This is just as true for single leg strategies, like a protective put.
For example, if you had an existing long position of seven Micro E-mini Nasdaq-100 futures contracts – and wanted to use options to protect those seven futures – you would need 70% of one E-mini Nasdaq-100 option.
Now with Micro E-mini options, precision hedging can be achieved. In this case, to have an exact protective put strategy, you can purchase exactly seven Micro E-mini Nasdaq-100 puts.
We’ve looked at two examples showing the benefits that the flexibility, precision and right-sized cost of Micro E-mini options can provide. Whatever your trading strategy is, there’s an option for you.