What is a contract multiplier & how does it work?

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.

Do options have a contract multiplier?

Options have a contract multiplier. Because option contracts are leveraged financial instruments, one stock option contract is equivalent to 100 shares of the underlying asset. The strike price is the specific price at which the underlying security can be bought or sold with an options contract.

What is the multiplier formula for equity options?

The multiplier formula for equity options is straightforward: # of Contracts x Options Price (in dollars) x 100 = Trade Cost (plus transaction costs) If you bought two contracts of a call option in XYZ for $1.50, it’d actually cost you $300 (plus transaction costs).

What is a 100x contract multiplier?

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.