I want to buy 1 call option in XYZ company. The price is $5.50 per contract.?

Question

Is my total cost $5.50 or $550.00, which would be the 100 shares of stock the contract represents.

Answer 1

Since the contract represents 100 shares of the underlying, then yes your 5.50 call will cost $550, plus exchange fees AND the spread (the difference between the bid and ask, which can be very, very high even with liquid stocks).

The cost is given as a number, not a $, so this probably why it is confusing you.  For example, if an option is trading at 4 or 5.50 you would not say it is $4 or $5.50, even if this is true per share.  You would say it is trading at 4 or 5.50, which in turn represents $400 and $550, respectively.

I suggest you reading "Getting Started in Options" by Michael Thomsett or "Options as a Strategic Investment" by McMillan.

Good luck.

Answer 2

The price you are looking at is a per share price, so it's $5.50 per share and $550 per contract, plus trade fees.

Answer 3

It will cost you $550 plus commission

The unit of trading for option contacts is 100,  since one contract is for 100 shares.

Therefore the price you see of 5.50 is multiplies by the unit of trading (100) and you get $550.00

Before  you start to trade options, it would be better for you to learn a little more about them.

Here are some websites to help you

http://www.options-trading-advice.info/

http://www.optionseducation.org/

And here is a professional investors website for you to look at; http://www.schaeffer.com/

good luck, study well and you'll trade even better