Call options and max loss?

Question

lets say there is a company with ticker FOG for example, with a stock value of 50.

and there is a call option for july 60 @ price $5

lets say I buy 1 call option for july 60

how much do I pay for this stock option? 5 dollars or 5 * 100?

NOW MY 2 questions :

ive read that each option counts for 100 shares so does this mean i have to pay 100 times the option price?

whats my max loss?

Answer 1

All options are in lots of 100.

The July 60 @ $5 would cost you: $500

Your max loss would be: $500 (plus commisions).

You need to have a working knowledge of the GREEKS before buying options. you could be "in the money" and still lose if you don't understand what you're buying.

https://www.cboe.com/

http://www.redoption.com/

http://www.OptionPlanet.com/

http://www.thinkorswim.com/

Answer 2

$5*100

Yes

The option money (in this example $500)

Be careful though; Not EVERY option contract is for 100 shares.

Answer 3

1. 5x100 = $500

2. yes, it is correct

3. max loss = premium = $500

Answer 4

<<<how much do I pay for this stock option? 5 dollars or 5 * 100?>>>

$5 * 100 = $500

<<<ive read that each option counts for 100 shares so does this mean i have to pay 100 times the option price?>>>

So far you have received two answers, one saying it not always 100 shares and the other saying it is always 100 share.

If that is not confusing enough, let me give you a third answer.

First, I am assuming we are talking about options traded on a United States exchange. (I know in at least one other country the 100 shares rule does not apply.)

Second, you need to understand the multiplier and the number of shares are not always the same.

Every option when it first comes out is for 100 shares and has a multiplier of 100. However, a merger, spin-off, split or extraordinary dividend can cause a contract adjustment. For example, Bear Stearns options were adjusted when it was taken over by JP Morgan. Those options now "count for" 21 shares of JP Morgan but still have a multiplier of 100. For details see

http://www.cboe.com/publish/TTStockSM/08...

To search for other contract adjustments use the search facility at

http://www.cboe.com/tradtool/contracts.a...

<<<whats my max loss?>>>

If you pay attention, your maximum loss is $500. If you do not pay attention and the stock is over $60 per share at expiration by at least one penny, the option will automatically be exercised and you will have paid $6,500 ($6,000 + $500) for 100 shares of FOG. That would make your max loss possible $6,500.