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Jared Dillian

Micro-Sized Stock Options Are a Clear Sign It’s Time to De-Risk

The Chicago Board Option Exchange’s latest product shows how the line between investing and gambling has become almost indistinguishable.

The stock market is more like a casino than ever before. 

The stock market is more like a casino than ever before. 

Photographer: Paul Yeung/Bloomberg via Getty Images

The Chicago Board Options Exchange plans to launch “nano” options on the S&P 500 Index early in 2022. These contracts will be one-hundredth the size of the mini S&P 500 options and one-thousandth the size of the options commonly used by institutional investors such as hedge funds. As Bloomberg News points out, this means that if an option on the S&P 500 is priced at $1,000, the corresponding nano option would cost $1. The nano options will have a maximum maturity of one week and be settled in cash.

There are a few things to unpack here, and not all of them are good. On one hand, Cboe Global Markets Inc. is trying to get small -- very, very small -- retail investors to spend a few dollars on an option contract here and there, in the hopes that these small investors will one day become large investors and trade the institutional size contracts. This won’t be profitable for the exchange anytime soon; it’s an investment in the future, much as fractional shares are for the retail brokerages. You want to get ‘em hooked while they’re young.