Mini-Sized Dow Options

AAA

DEFINITION of 'Mini-Sized Dow Options'

A type of option for which the underlying assets are Dow Jones Industrial Average futures contracts. The option has a 5 times multiplier, which means that each option contract on the index controls 5 times the value of the index. This gives the option holder more leverage on his/her investment compared to cash index options at a lower cost. The option is traded on the Chicago Board of Trade.

INVESTOPEDIA EXPLAINS 'Mini-Sized Dow Options'

When purchasing a Mini-Sized Dow Option, the premium paid is 5 times the quoted price and the contract would be exposed to 5x the index value. For example, if the quoted price is 200 for the index value of 10,200, then the premium for the option is $1,000 (5 x 200) and the exposure of the contract is 51,000 index points (10,200 x 5).

RELATED TERMS
  1. Chicago Board Of Trade - CBOT

    A commodity exchange established in 1848 that today trades in ...
  2. Index

    A statistical measure of change in an economy or a securities ...
  3. Index Futures

    A futures contract on a stock or financial index. For each index ...
  4. Index Option

    A financial derivative that gives the holder the right, but not ...
  5. Futures Contract

    A contractual agreement, generally made on the trading floor ...
  6. Underlying

    1. In derivatives, the security that must be delivered when a ...
Related Articles
  1. Options Basics Tutorial
    Options & Futures

    Options Basics Tutorial

  2. Options On Futures: A World Of Potential ...
    Options & Futures

    Options On Futures: A World Of Potential ...

  3. Futures Fundamentals
    Insurance

    Futures Fundamentals

  4. Are Equity-Indexed Annuities Right For ...
    Savings

    Are Equity-Indexed Annuities Right For ...

comments powered by Disqus
Hot Definitions
  1. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific ...
  2. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  3. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  4. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
Trading Center