Understanding Option Contracts: Shares in Standard and Mini Contracts

When discussing option contracts, one of the most common questions is whether the number of shares involved in a standard contract is consistent. In this article, we explore the share requirements for both standard and mini options, as well as the variations in different countries and exchanges.

Standard Option Contracts: 100 Shares

Standard option contracts typically involve a minimum of 100 shares of the underlying asset. This means that one option contract usually represents the right to buy or sell 100 shares of the stock. This uniformity ensures consistency in trading and helps standardize the financial calculations involved.

Exceptions and Variations

There are a few exceptions and variations to this standard. For instance, mini options are available for some stocks and these represent a different number of shares, usually 10 shares. These mini options are less common and are typically used for trading high-priced securities.

Country-Specific Differences

The requirements for option contracts can vary from country to country and by the specific exchange. In the United States:

Standard lots are 100 shares. Jumbos (1000 lots) and tynies (10 lots) also exist but are less common. UK listed options on ICE are typically 1000 shares. European stocks on Eurex come in two flavors: 100 lots and 10 lots.

Indices trade in index points rather than shares, meaning these contracts do not have a share requirement in the traditional sense. If you want to trade the 10 lot size, you may pay more than the standard size, or you can trade using other customized options.

Non-Standard Contracts

Non-standard contracts can arise due to non-standard stock splits or special dividends. These contracts may not involve the standard 100 shares but are specific to the situation and still represent a defined number of shares.

Conclusion

While standard option contracts usually involve 100 shares, mini options and other variations do exist. The specific requirements depend on the country and the specific exchange. Whether you are dealing with standard or non-standard contracts, understanding the number of shares involved in each type is crucial for successful trading.

References

Mini Options: A Useful Tool For Trading High-Priced Securities