How Share Quantities Are Set in Call Option Contracts

Summary

The note explains that the share quantity attached to a call option is part of the contract terms. In the cited IBM example, the buyer may purchase a specified number of shares at the strike price during the option’s exercise period. For standardized options, the quantity is set by the product specification; the answer identifies 100 shares as a common contract quantity.

For a nonstandard or privately negotiated contract, the parties can agree on the quantity along with the strike price. Thus, the example’s number is not a universal feature of the definition of a call option, even though a standard contract commonly specifies a fixed deliverable. The short discussion does not cover adjustments to contract size after corporate actions or differences among option markets, so the stated common quantity should not be taken as applying to every listed option.

Key ideas

• A call option gives its buyer the right, but not the obligation, to purchase the contractually specified quantity.
• Standardized options define their contract quantity in the product terms.
• The note identifies 100 shares as a common quantity for standard contracts.
• Nonstandard contracts can specify a quantity agreed by the buyer and seller.

Tags

# In an example of "call options"


# In an example of "call options"












The following is an excerpt from Introduction to the Mathematics of Finance by Roman:

> As a more concrete example, suppose that IBM is selling for $\$100$ per share at this moment. A $3$ month call option on IBM with strike price $\$102$ is a contract between the buyer and the seller of the option that says that the buyer may (but is not required to) purchase $\color{blue}{\bf 100}$ shares of IBM from the seller for $\$102$ per share at any time during the next $3$ months.

In this example is the number $\color{blue}{100}$ in blue arbitrarily picked by the author? Is it relevant to the concept of "call option"?

## Answer by Alexis (score 1, accepted)

https://quant.stackexchange.com/a/26280

Call options are usually standardized product: in the contract you can (but are not obliged to) buy a certain amount, which is specified. The most common quantity is 100 shares (see for example the description by J. Hull, Options, Futures, and Other Derivatives).

## Answer by nmunozsi (score 0)

https://quant.stackexchange.com/a/26282

Yes it's arbitrary, when you agree on the condition you define the how many shares and the Strike price if the contract is not standard

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.