← IntermediateLesson 7 · 4:46
Is every option times 100?
Summary
You can find an option's multiplier before you trade and turn a price on the screen into the real bill. You know that only stock options use 100, and you can work out the bill for SPX, XSP, options on ES and MES futures, and contracts on oil, gold and money.
Key terms
- multiplier
- The number you multiply an option's price by to get what one contract really costs.
- index
- One number that tracks a whole basket of companies, such as the S&P 500.
- index point
- A one-unit move in an index, such as from 6,000 to 6,001.
- SPX
- Options on the S&P 500 index, worth $100 for each point of option price.
- XSP
- The Mini-SPX, tracking one tenth of the S&P 500, still worth $100 a point.
- futures contract
- A deal made today to buy or sell something on a later date at a price fixed now.
- ES
- The E-mini S&P 500 future, worth $50 a point; its options cover one ES contract.
- MES
- The Micro E-mini S&P 500 future, worth $5 a point, one tenth of ES.
- troy ounce
- The weight used for gold, a little over 31 grams.
- face value
- The amount a loan such as a Treasury note pays back at the end.
Check yourself
Answer each question to see why the right answer is right.
1. An SPX option, on the S&P 500 index, is priced at 10 points. What does one contract cost?
2. XSP, the Mini-SPX, tracks one tenth of the S&P 500. How does the same bet become one tenth the size?
3. The same price of 10 points shows on an SPX option, an option on ES and an option on MES. What are the three bills?
4. A gold option is priced at $1 an ounce. What does one contract cost on GC and on MGC?
5. Why does the multiplier matter beyond the size of the bill?
Finished the video and the quiz? .