Contract specs and the multiplier
Lesson 2 · about 8 min
An option quote looks like a small number, and that is where most first-time mistakes come from. The quote is per share; the contract controls 100 shares. Every dollar figure you see on the chain has to be multiplied by 100 before it means anything to your account.
Reading a chain line
A typical listing:
XYZ 17 Oct 2026 55 C bid 2.10 ask 2.20 last 2.15 vol 412 OI 3,180
- XYZ is the underlying.
- 17 Oct 2026 is the expiration date.
- 55 is the strike price.
- C means call (P would be put).
- bid 2.10 / ask 2.20 are per-share prices. Buying at the ask costs 2.20 × 100 = $220. Selling at the bid brings in $210.
- vol is contracts traded today; OI (open interest) is contracts currently outstanding.
The $0.10 gap between bid and ask is $10 per contract, or about 4.6% of the price. Module 8 covers why that number matters far more than it looks.
The multiplier
The standard equity option multiplier is 100. It applies to everything:
| Quoted figure | Per share | Per contract (×100) |
|---|---|---|
| Premium | $2.20 | $220 |
| Intrinsic value | $3.00 | $300 |
| Strike × shares owed | $55.00 | $5,500 |
| Daily theta (say) | $0.04 | $4 |
If you sell one $55 put and are assigned, you buy 100 shares at $55, which is $5,500 of stock. If you sell ten, it is $55,000. New traders regularly sell "a few puts" on a stock they like and discover they have committed several times their account.
Index options and some ETF options also use 100, but a handful of products differ. Mini contracts (often suffix "M") use 10. Some futures options use the underlying futures multiplier. Check the spec before trading anything unfamiliar; the contract specification page on the exchange website lists it.
Adjusted contracts
When a company splits its stock, pays a special dividend, or is acquired, existing options are adjusted rather than cancelled. A 2-for-1 split typically turns one 100-share contract into two contracts at half the strike. A special dividend can reduce strikes by the dividend amount. A merger for stock can make the deliverable a mix of shares and cash. Adjusted contracts are usually marked with a different root symbol (for example, XYZ1 rather than XYZ) and often trade with wide spreads and odd prices. Unless you know exactly what the deliverable is, leave them alone.
Strike intervals
Strikes are listed at fixed intervals that depend on the stock's price and how actively it trades: $0.50 or $1 on lower-priced and heavily traded names, $2.50 or $5 on higher-priced ones, and finer increments near the current price on the biggest names. The exchange adds strikes as the stock moves. The relevance for you is that the strike you want may not exist yet and that far-away strikes are often illiquid.
Key idea: Quotes are per share; contracts are 100 shares. Every number on the chain, and every obligation behind it, is 100 times what it looks like.
A sizing sanity check
Account: $12,000. You want to sell a cash-secured put on a $48 stock at the $45 strike for $1.10.
- Premium received: $1.10 × 100 = $110.
- Cash required if assigned: $45 × 100 = $4,500, or 37.5% of the account, in one stock.
- Return on the cash if the put expires worthless: $110 / $4,500 = 2.4% for the period.
Nothing wrong with that trade as such, but "I collected $110" is not the story. "I committed $4,500 to one name" is the story. Make the multiplication before you place the order, not after.
Worked example: the same trade at different sizes
| Contracts | Premium received | Obligation if assigned | Share of $12,000 account |
|---|---|---|---|
| 1 | $110 | $4,500 | 37.5% |
| 2 | $220 | $9,000 | 75% |
| 3 | $330 | $13,500 | 112.5% (not allowed) |
A margin account might let you sell the third put, because the broker's margin requirement on a short put is much less than the full strike. That does not make the obligation smaller.
Try it: Open a chain for any stock and pick an out-of-the-money put. Write the premium, the obligation in dollars, and what percentage of your real account that obligation would be. Then imagine the stock halved overnight and compute the loss on assignment. That figure, not the premium, is your risk.
Recap
- A chain line gives underlying, expiration, strike, type, bid, ask, volume and open interest.
- Standard equity options control 100 shares; multiply every quoted number by 100.
- Assignment on a short put means buying 100 shares per contract at the strike, which is often a large fraction of a small account.
- Adjusted contracts (odd root symbols after splits, special dividends, mergers) have unusual deliverables and are best avoided.
- Check the contract spec for anything that is not a plain US equity option; multipliers vary.
See it drawn
Original diagrams for the ideas on this page. Illustrative, not real market data.