Of course, you're not limited to covered calls and puts, you can also get fancy and create calendar spreads, bull/bear credit/debit spreads, and every other possible combination that is available to 100 share contracts.

This leads me to one of my favorite ways options allow me to create a position, the credit spread. In its most common and basic form, a credit spread is a combination of a long and short option with different strike prices but using the same stock and expiration date. With a credit spread, the long option is further out-of-the-money than the short option contract, resulting in a net gain of premium.

For example, a bull credit spread for Apple that I like is the February $540 /$510 put spread (credit spread). I can sell the $540 February put for about $22.50 and buy as a hedge the $510 put for about $11.50 for a net credit of $11. Previously, this spread would have a total risk of $1900 and a potential gain of $1,100.

With the new CBOE's mini options, I can create the position and only risk a total of $190 and potentially gain as much as $110. Because I'm bearish with Amazon, I will use it as my bear example and continue to use a credit spread. For a bear credit spread, we use call options instead of puts. I like the February $410/$440 credit spread. We can sell the $410 call for about $13.50 and buy as a hedge the $440 call for about $6.25 for a net positive premium of $7.25.

Using 100 share traditional contracts results in a maximum loss potential of $2,275 ($410 - $440 = $30 minus the premium of $7.25 = $22.75 times 100 shares = $2,275). If $2275 is too much to risk even though you're Amazon bearish, a mini contract total risk is only $227.50, with a potential gain of $72.50.

Making a full circle back to Apple, buying calls is no longer the only strategy available to modest retail investors that want to gain exposure, but also sleep at night knowing they have limited risk. By using mini contracts, you can more precisely dial-in your risk to fit your investment objectives.

At the time of publication the author had no position in any of the stocks mentioned.

Follow @RobertWeinstein

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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