A traditional call or put option has 100 shares of the related stock as its underlying asset. As a result, the quoted price you see for any given call or put must be multiplied by 100 in order to determine what the actual cost of the option contract would be. Typically, when the underlying asset is any amount other than 100 shares, it's due to some special circumstance -- for example, a stock split, reverse split, or merger.
Mini options, on the other hand, have 10 shares of the underlying stock as their deliverable asset. As you might expect, a mini option's cost in dollars is equal to the option's quoted price multiplied by 10.
Introduced in March 2013 on a limited number of securities, these compact contracts offer a number of benefits to smaller, retail-level traders.
First, mini options carry a lower price per contract, since they're based on one-tenth of the number of shares as a traditional option contract. When dealing with a high-priced stock like Apple (AAPL), which opened at $441.45 on the day its mini options launched, this greatly reduced cost of entry can completely remove a barrier to entry for smaller investors.
Of course, mini options also provide the flexibility to make smaller (or odd-sized) bets on securities, no matter the share price of the underlying. If a trader has only a limited amount of capital available to trade options, minis might make the difference between acting on a potentially lucrative trade idea, or sitting on the sidelines and awaiting the next opportunity.
Minis allow investors to fine-tune their hedging strategies, as well. If a trader is looking to hedge 50 shares of a particular stock, a traditional put contract controlling 100 shares would be overkill. However, five mini options would provide the exact amount of coverage needed to guard against a downturn, while keeping hedging costs to the absolute minimum. Likewise, mini options enable shareholders to generate income by writing covered calls, even if they own fewer than 100 shares of the stock.
Despite their smaller size, mini options carry the same risks and rewards as traditional puts and calls. Traders should continue to follow their usual rules of money management when playing minis, and -- as with regular, "full-sized" contracts -- keep an eye on implied volatility levels to avoid overpaying for options.