Options Basics

Option Contract Multiplier

The option contract multiplier is the number of shares an options contract represents. Stock options have a 100 contract multiplier, so one option contract controls 100 shares of stock.
Option Contract Multiplier
Kirk Du Plessis
Apr 19, 2021

Option contract multipliers are a way to standardize the trading and pricing of options across such a broad and efficient market such as our own. These multipliers create uniformity with regard to standard pricing models, underlying size, and expiration dates. Without option contract multipliers and a uniform way to price contracts could you imagine how chaotic the market would be if we have strike prices for every stock at penny wide intervals, and just how long it would take to go through the expiration and assignment process? In nearly all options that you will likely be trading the contract multiplier will be 100, which means that 1 option contract controls 100 shares of underlying stock. This also means that the price of the underlying option must be multiplied by 100 to get the actual value. For example, a call option may have a price of $0.50 on your broker's platform, but it is actually worth $50 because of the 100x contract multiplier.

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Profit and Loss Diagrams
Profit and loss diagrams are visual aids that display where an options strategy will make or lose money at expiration based on the underlying asset’s price. Profit and loss diagrams illustrate the potential outcomes of a strategy, including the break-even points, max loss, and max gain.

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