Mini-Sized Dow Options
What it is:
How it works/Example:
Bought and sold on the Chicago Board of Trade (CBOT), mini-sized Dow options have a leverage ratio of 5:1. In other words, they leverage five times the value of their underlying asset. As such, they cost five times their face value and experience movements in value five times greater than those of the Dow itself.
This means that a mini-sized Dow option priced at $100 would actually cost $500. In addition, a 100-point rise in the Dow Jones Industrial Average would actually be experienced by the option as a 500-point rise.