Maybe you’re trading stocks or commodity for some time and so are seeking new opportunities.
Have you considered index options? They’re not exclusively for institutional investors anymore.
Actually, many retail equity options traders will make a simple transition to Mini S&P 500 and Mini Russell 2000 Index options. For these are smaller versions from the equivalent standard index options contracts. At 1/10th the size of the common contracts, Mini Index options allow retail traders to gain broad market exposure and execute trading strategies with less capital.
5 Why you should Trade Index Options
Index options can help traders diversify a portfolio and gain broad exposure with (typically) one trade. As compared to single stocks, index options lessen the odds of experiencing a gap move that assist narrow the target to advertise risk rather than individual company risks.
Index options generally have lower volatility than options on individual stocks. Volatility around earnings reports, mergers, and also other news events may have a significant effect on investment prices. Though index options, those volatile moves tend to lessen.
Index choices are European style, meaning they cannot be exercised before expiration. Equity options, however, might 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 will have narrower bid/ask spreads than single-stock options on account of greater liquidity.
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