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Why does one option contract mean 100 shares?
One standard stock option covers 100 shares. Every number on the chain is per share, and every number in your account is times 100. Here's what that does to a trade.
The short answer
A standard US or Canadian stock option contract covers 100 shares. That is the Contract multiplier. The Options chain quotes every price per share, so you multiply by 100 to get what actually moves in your account.
Sell one put with a $1.00 premium, and you collect $100, not $1. Get assigned at a $45 strike, and you buy 100 shares for $4,500, not one share for $45.
What the multiplier does to each number
| On the chain | In your account (one contract) |
|---|---|
| Premium $1.00 | $100 collected |
| Strike $45 (put) | $4,500 of cash set aside |
| Strike $55 (call) | 100 shares you must own to be covered |
| Stock falls $5 after assignment | −$500 |
| Theta −0.03 per day | About $3 a day melting in your favour |
Two contracts doubles every line. Five contracts is five hundred shares. The premium looks small and the share side looks far away, which is how beginners end up with more exposure than they meant to have. See how many contracts to sell.
One example, scaled (an illustration, not a trade idea)
A made-up stock, XYZ, trades at $50. You sell a 30-day $45 put for $1.00.
| 1 contract | 3 contracts | |
|---|---|---|
| Premium collected | $100 | $300 |
| Cash set aside | $4,500 | $13,500 |
| XYZ at $50 at expiry | +$100 | +$300 |
| XYZ at $40 at expiry | Assigned 100 shares: −$500 + $100 = −$400 | Assigned 300 shares: −$1,500 + $300 = −$1,200 |
| XYZ at $30 at expiry | −$1,500 + $100 = −$1,400 | −$4,500 + $300 = −$4,200 |
The three-contract seller collected three times the premium and owns three times the problem. That is a math example, not a prediction.
Why it matters for covered calls
To sell one Covered call, you need 100 shares. Not 50, not 99. Fractional shares don't count. If you own 150 shares, you can sell one call; the other 50 shares are uncovered.
That's the capital gate on the wheel strategy. A $20 stock needs about $2,000 for one round. A $200 stock needs $20,000. The strategy doesn't scale down; the stock choice does.
Account note: in Canada, that cash can sit in a TFSA or RRSP if the broker allows the trade; options permissions differ by broker, so ask before you plan around it.
Index and non-standard contracts
A few things break the 100 rule, and the chain will say so:
- Index options (like SPX) settle in cash, with a $100 multiplier on the index level rather than 100 shares.
- Adjusted contracts after a split, merger or special dividend can cover a different number of shares. The chain usually marks them with a note or a changed symbol.
- Mini contracts (10 shares) have been listed on a few names in the past, but they're rare. Check the multiplier column.
If a contract looks oddly cheap, check the multiplier before you sell it.
Questions
Can I sell an option on fewer than 100 shares?
Not a standard covered call. The contract covers 100 shares, so you need 100 to be covered. Mini contracts have existed on a few names but are rare; check your chain.
Why is the premium shown as $1.00 when I received $100?
The chain quotes per share. One contract is 100 shares, so the account shows the per-share price times 100.
Does the 100-share rule apply to ETFs?
Yes, for standard options on ETFs like SPY or XLF. Index options like SPX are cash-settled with a $100 multiplier instead.
How many contracts should a beginner sell?
One. Every number on this page is per contract, and the share risk multiplies with each one. Add a second only after the first has been through an assignment on paper.
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