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Options Contracts

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Options Contracts
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Options Contracts - September 28th, 2009

Options markets trade options contracts, with the smallest trading unit being one contract. Options contracts specify the trading parameters of the market, such as the type of option, the expiration or exercise date, the tick size, and the tick value. For example, the contract specifications for the ZG (Gold 100 Troy Ounce) options market are as follows:
Symbol (IB / Sierra Chart format): ZG (OZG / OZP)
Expiration date (as of February 2007): March 27 2007 (April 2007 contract)
Exchange: ECBOT
Currency: USD
Multiplier / Contract value: $100
Tick size / Minimum price change: 0.1
Strike or exercise price intervals: $5, $10, and $25
Exercise style: US
Delivery: Futures contract
Note that options contracts have three more entries than futures contracts because of the three additional parameters that are needed to trade options, which are the strike price, the exercise style, and the delivery method.
The contract specifications are specified for one contract, so the tick value shown above is the tick value per contract. If a trade is made with more than one contract, then the tick value is increased accordingly. For example, a trade made on the ZG options market with three contracts would have an equivalent tick value of 3 X $10 = $30, which would mean that for every 0.1 change in price, the trade's profit or loss would change by $30.

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