Shares
Shares are the individual units a company's ownership is divided into. Learn how they work, why 100 of them anchor every option contract, and what shares outstanding means.
Shares are the individual units that a company's ownership is chopped up into. If a stock is the idea of owning a piece of a company, a share is the actual unit you hold, the way a pizza is the idea and a slice is what ends up on your plate.
Every stockholder owns some number of shares, and that number, compared to the total, is exactly what percentage of the company they own. Let me show you how the pieces fit together.
Slicing the Pie
A company decides how many shares to divide itself into when it goes public, and that total is called shares outstanding. A company with 1,000,000 shares outstanding where you own 10,000 of them means you own exactly 1% of the company, no matter what the share price happens to be that day.
The number of slices is a choice, not a measure of size. A company could split itself into 10 million tiny shares or 100,000 large ones; the underlying business is identical either way. This is why comparing two companies by share price alone tells you nothing, one large slice can be worth more than a hundred small ones from a bigger pie.
The Count Can Change
Shares outstanding is not fixed forever. A company can issue new shares to raise cash, which dilutes existing owners since the same pie is now cut into more pieces. It can also buy back its own shares, shrinking the count and making each remaining share worth a slightly bigger slice. Watching how shares outstanding trends over time tells you whether a company is diluting or rewarding its owners.
Why It Matters for Options
The number 100 might be the single most important number in options, and it comes directly from how shares work.
Every contract is 100 shares. A standard listed option controls exactly 100 shares of the underlying stock. That is why an option's price gets multiplied by 100 to find its real dollar cost: a $2.00 option premium actually costs $200.
Assignment means real shares move. If a call or put is exercised or assigned, actual shares change hands, 100 per contract, at the strike price. That is the whole point of a covered call or a cash-secured put: you are agreeing to trade real shares, not just cash.
Share count affects the stock, which affects the option. A large buyback or a big new issuance changes the supply of shares, which can move the stock price, which in turn moves every option tied to it.
- Shares are the individual units a company's ownership is divided into.
- Your ownership % is your shares divided by shares outstanding.
- The share count can change through buybacks or new issuance.
- Every standard option contract controls exactly 100 shares.
Pop Quiz
Three quick questions to see what stuck. Pick an answer and the explanation shows up right away.
What are shares?
Shares are the units of ownership, and how many you hold determines your percentage of the company.
If you own 10,000 of a company's 1,000,000 outstanding shares, what percent do you own?
10,000 divided by 1,000,000 is 1%, regardless of the current share price.
How many shares does one standard option contract control?
Every standard listed option contract represents 100 shares of the underlying stock.
Bottom Line
Shares are the individual units a company's total ownership gets cut into, and how many you hold, compared to the total outstanding, is exactly what percentage of the company you own. That count can shift over time through buybacks or new issuance, changing what each share represents.
For options traders, shares are the literal unit everything is built on: every standard contract controls exactly 100 of them, and that fixed multiplier is why option premiums, assignment, and covered strategies all work the way they do.
Keep going: the idea of ownership itself is a stock, what one share costs is the stock price, and the strategy built around trading 100 shares at a time is the covered call.