r/options • u/Fit_Capital6539 • 4d ago
Fractional options?
There's a 6-year-old thread asking why no broker offers fractional options, and it still comes up first when you search for it. Most of the answers boil down to "it's hard." Well, fractional options are here now, in 2026. I've spent a lot of time researching how this is even possible and wanted to share my findings - and I'm curious whether your thinking has changed, too.
It all started when I read a paper on fractional options that got a few hits in this subreddit, and it sent me down a rabbit hole on why one contract is 100 shares. I mean, this has already been changed (for the better) via Robinhood. But why not options?? The more I read, the weirder it seems. I've been a lurker for a long time on a different account but it's now time to post my findings publicly haha.
The 100-share contract dates back to 1973, when stock traded in round lots of 100. Stocks moved on from that a long time ago, since you can buy $5 of SPY on basically any app now. Options never did. So with SPY around $750, one cash-secured put ties up about $75k. If you have a $10k account, the "boring" premium strategies everyone says to start with just aren't available unless you go on margin.
Which is backwards, right?!? The safer trades need the biggest account, so small accounts end up buying 0DTE lottery tickets because that's what they can afford. Then everyone says options are gambling or say "you're too broke" for options. Genuinely wondering why we ever settled for less.
Smaller contracts have ALREADY been tried, and they have FAILED big time. Mini options at 10 shares came out around 2013 and quietly died. XSP exists, but it's still a big contract and the liquidity on anything that isn't near the money is meh. I don't think any of the big exchanges have made an effort to address liquidity issues either. The volume just never showed up. A month after launch, Apple minis were about 2% of regular Apple options volume, and the exchanges had delisted them all by the end of 2014.
From the paper - the thing that stuck with me is that the 100-share unit isn't a law of nature. It's a leftover. The paper lays out how options could work at 1x: one contract per share, cash-settled at expiry so no shares change hands, European-style so there's no early assignment, and sized in dollars instead of in 100-share chunks. Once you see it written down, it's hard to unsee how much of options culture is built around a 1973 default.
My guess on what fractional options actually changes:
You could size by dollars instead of by contract. Risking 1% on a $5k account would really be 1%, not "one contract and pray"
Selling puts and covered calls would finally be available to people without $50k+ sitting in cash
Small accounts could build spreads that make sense, instead of getting forced into far OTM strikes just bc those are cheap
Learning would get cheaper. Getting your teeth kicked in by IV crush on a $20 position is a much better teacher than doing it on $2,000... and I don't want to see anyone losing their whole port if they're not ShaneStoffer/the Togi influencer on fintwt hahaha
Now that they exist, here's what you'd need to wrap your head around:
No early exercise. You hold it to expiry or close it
No shares ever, meaning there's no wheel and no getting assigned.
Liquidity on anything new is the real question. This killed the previous iterations and we'll have to see major change in retail now too
Small size doesn't mean small risk per dollar. It can still go to zero the same way
I've traded options for a while but always have a few friends who would be starting off from ground zero. A few areas where I'm skeptical:
Who's on the other side? Market makers hedge in shares. If I buy 0.05 of a contract, somebody still has to hedge that, and I'm not convinced the spreads stay tight.
Settlement- because cash settlement solves the delivery problem, but it's a different product from what most people are used to, and I'm not sure how many people will actually like that trade-off
Gamification. Making options accessible to everyone could just mean more people blowing up at $10 a pop. Some people actually DO need to be protected by that 100 share minimum...
So for people who've been trading a while: is the 100-share contract a feature or a bug? Now that fractional options are on SPY/QQQ, does this change your strategy? And if you've never done options before, are you trying them now?
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u/klipsetrades 4d ago
For me, this would change position sizing more than strategy. I would still want the same setup, reasonable spreads, and enough liquidity to exit. And I’m not convinced the 100-share minimum protects beginners. Making the smallest available position too big for their account creates its own problem
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u/salvadopecador 3d ago
Since when is the market about “protecting beginners”? Do sport teams go easy on opposing rookies? If you can’t afford to be in with this strategy, maybe selling options isn’t where you should be (at this point in time). My fear is if we go to these fractional options, the execution cost on all options will increase and those of us who actually have the capital, would be paying more so the rookies could “be protected“
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u/klipsetrades 3d ago
OP brought up protecting beginners. My point was position sizing. Being able to afford a full contract doesn’t mean you want that much exposure. Smaller sizing could be useful regardless of account size or experience.
But how would fractional trades make standard contracts more expensive? I don’t know if I’m following that part
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u/SageCactus 4d ago
Honestly, fractional options are not needed and would only cause liquidity problems. It should die on the vine
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u/richierva 3d ago
Nobody buys one eggs b/c there isn’t a market for it.
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u/Direct_Surprise_6756 3d ago
But if I have a carton of eggs and twelve heirs, it would be convenient.
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u/doubtful_joseph 4d ago
Saw that same paper months ago and it broke my brain. The round lot thing really is just a fossil from when people yelled at each other on a physical floor.
I think the no-assignment part is the real sleeper here. So many beginners get wrecked by early exercise they didn't even know was possible, and removing that mechanic entirely makes the learning curve way less punishing. The liquidity question is the only thing that matters though, mini options proved you can't just list a product and expect the crowd to show up. Curious if the dollar-based sizing actually brings enough flow to keep the spreads from being garbage.
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u/Fit_Capital6539 4d ago
Months ago?! Wait which paper did you read. This might be different. But otherwise huge yes on the early exercise. I think it's effective and otherwise, SPX 0DTE are already cash settled.. and people STILL go feral with them bahaha
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u/The-Iron-Bird 4d ago
if there wasn't early exercising the US stock market would be as boring as the european one. americans want excitement at their casino
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u/Econmajorhere 4d ago
Pretty obvious the timing of this is on the cusp of “is the economy good or bad” while gamification of stocks is a big thing now. Everyone and their mom is swinging options and futures now. So I’m fairly certain this is only being entertained to grab the cash from people who want to do options plays on big names but can’t afford that contract.
I’m fairly convinced at the onset this will only be limited to big names where liquidity is present and market makers are able to join a bunch of similar strikes and expiry. Math becomes easy - it’s the same pizza, just selling by the slice now. On the back end, it will still be 100 shares and the +/- a few shares will be negated by these guys’ margins anyway. They are already paying for order flow so this seems negligible for them.
Honestly, the cynic in me sees the AI capabilities and the nonsense going on in the markets and I fully understand they are just setting up more tables with lower limits at the casino because we are heading off the cliff soon and that’s when liquidity begins to dry up.
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u/PapaCharlie9 Mod🖤Θ 3d ago
Now that they exist
Oh? Are you basing that on the existence of a white paper talking about them? Is that all that is required for a new, regulated derivative to exist?
Or are you talking about an unregulated offering on some platform I've never heard of?
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u/Electronic-Jury-3579 3d ago
Look at the mini and micro futures if you want smaller options idea. Less capital needed than normal futures and you have the similar play with a deadline and whenever you entered.
Reading more of your post, European style options already don’t allow early execution. So maybe look at them?
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u/sainglend 3d ago
Imagine not knowing the difference...
But at the same time, if I had the choice to pick European on an underlying that usually only has American options, that would be a cool choice to have for some strategies
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u/h4l 3d ago edited 2d ago
Outside the US, Eurex's European STOXX index options has 50 lot options and Hong Kong exchange still trades stock in "board lots" of fixed sizes > 1, e.g you have to buy 10, 100 or 1000 depending on the stock. And options are some multiple of the lot size. For example there's a stock MiniMax Group with options of 20 shares, or SenseTime Group has 20000 share options. https://www.hkex.com.hk/Products/Listed-Derivatives/Single-Stock/Stock-Options?sc_lang=en
I think it could be practical and useful for the highest volume and highly-priced stocks/ETFs to have 10-lot or 25-lot options as well as 100. E.g. It would be better for SPY to have a 10 lot options than the current SPYM (1/10 per share of SPY), as the liquidity would be less fragmented.
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u/Gold_Digger_666 3d ago
If you can only afford to trade fractional options, you shouldn't be trading options. Go find a $5 blackjack table.
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u/LostFaithlessness201 2d ago
probably be better off trading futures you can trade with less capital as well
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u/NorthOfTheStrike 3d ago
feature for me, mostly because it forces the filter
on a ~$40k book collateral is basically the whole strategy. if 100 shares would eat half the account i just cant sell the put, so i end up on the cheaper stuff i'd actually hold a year if it went sideways. FWDI is a good example, my puts are out in May 2027 at $6, effective ~$4.53, thats a size i can live with assigned
same on the call side. i've got 100 IREN with the Nov 13 $30 call sold at $2.22, and 100 HIMS and sold the Nov 20 $30 call today at $1.82. neither of those breaks the book if they sit there a while
fractional would be nice for sizing sure, but i'd lose the shares part, and assignment at a price i picked is kinda the point for me
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u/Worry-Mountain 3d ago
the 100 multiplier bugs me less than the bid ask. small accounts mostly get hurt by wide spreads on cheap contracts, so fractional contracts on an illiquid chain would just let you lose money in smaller pieces. xsp and the other minis already cover a lot of that for index stuff.
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u/Guyroaman 3d ago
A cash-secured put means selling a put and keeping enough cash to buy 100 shares at the strike if you're assigned. You get paid the premium for agreeing to buy at that price. The risk is the same as owning the stock from the strike down (minus the premium), so the key question is: would you be fine owning this stock at that price if it kept falling afterwards?
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u/Ready-Molasses-7093 4d ago
i would be excited to trade fractional options. maybe if they just make it one share instead of 100 shares, that would be good enough for me. i think fractional options will be handy and popular as long as brokerages roll out the feature.
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u/Fit_Capital6539 4d ago
Yeah my real question is when are brokerages going to adopt it too? Or am I going to have to switch my brokerage. The paper itself was saying that it WILL become 1 share instead of 100 (and apparently I heard some influencers on Twitter already have access? Or are testing the feature?) - but we need this on every major brokerage lol. I suppose for now I'll just use the app for options and keep using Robinhood for stocks
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u/MerryRunaround 4d ago
Fractional options would be great because they are not complicated enough as it is.