Maybe you have been stock market trading or stock options for a while and so are trying to find new opportunities.
Have you considered index options? They are certainly not only for institutional investors anymore.
The truth is, many retail equity options traders may make an easy transition to Mini S&P 500 and Mini Russell 2000 Index options. Like these are smaller versions in the equivalent standard index options contracts. At 1/10th how big is the common contracts, Mini Index options allow retail traders to realize broad market exposure and execute trading strategies with less capital.
5 Top reasons to Trade Index Options
Index options can help traders diversify a portfolio and gain broad exposure with (in many instances) one trade. As compared with single stocks, index options lessen the odds of experiencing a gap move which help narrow the target to advertise risk rather than individual company risks.
Index options tend to have lower volatility than options on individual stocks. Volatility around earnings reports, mergers, and other news events can have a significant effect on share prices. But with index options, those volatile moves often erase.
Index choices are European style, meaning they can’t be exercised before expiration. Equity options, conversely, could be exercised anytime. Share settle to shares of the underlying stock, while index options settle to cash.
Index options typically entitled to the 60% long-term, 40% short-term capital gains tax treatment.*
Index options often have narrower bid/ask spreads than single-stock options due to greater liquidity.
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