I really like selling both puts as de facto limit orders and calls. For some more information on my option strategy or general information check here and here. Currently one call or put option covers 100 shares. This means if I want to sell a $500 put option on a company like Apple (AAPL) I would need $500 * 100 shares = $50,000 to be able to sell a cash secured put. Considering that's over half of my portfolio I don't think I'll be doing that anytime soon. This has been the biggest burden with options trading, the cash outlay if you want to avoid potential margin costs is very high for some of the high priced (nominal not valuation) stocks.
This will all change come March 18th. It's been approved for there to be "mini-options" that act the same as regular options but only 10 shares are tied to them. This cuts the cash outlay to secure the $500 AAPL put from above from $50,000 to $5,000. That's a much more manageable size for the typical retail investor.
When March 18th rolls around, only a few select securities will be available with the mini-options. Currently those are AAPL, GOOG, AMZN, SPY, and GLD. I'm not too excited about the current choices, although GOOG does interest me even though I'm a dividend growth investor. It'll be interesting to see how the commissions/fees play out because that will be a big determinant in your overall return with the mini-options.
More stocks will be added with two criteria that must be met.
(1) Share price (stock or ETF) must be $100+
(2) 3-month average trading volume 45,000+ contracts
Here's a list of potential stocks that I would love to see added to the mini-option list:
I'm sure there's more but this is just what I can think of off the top of my head for stocks that carry $100+ share prices other than the ones previously mentioned.
I like the idea of the mini-option and hope that more companies will be added to the list of potential candidates. Companies like 3M and CVX would require potentially committing over $10k at once to a position with the traditional option contract and IBM would require $20K. My portfolio just isn't large enough currently and even though these are solid companies I don't think I'd feel comfortable throwing down $10 to $20k all at once on one position unless I had a huge windfall that needed to be put to work. I won't be allocating any capital to the mini-options when they first roll out, mainly due to the stocks not really meeting my core investment philosophy. However as other companies are added I would gladly take advantage of the smaller options since you can really customize your position size from 10, 20, 30 or 110, 120...
What do you think of the mini-options? Will you be trying to utilize the mini-option contracts? Are there any companies that you'd like to see added?