Ask the Institute

DATE: August 12, 2013

QUESTION:

Can you explain the concept of notional value and its importance for an options trader to understand?

ANSWER:
Notional Value is the total dollar amount equal to the strike price of an option times (x) the multiplier. It is an important concept for an option trader to understand because some options that have the same underlying instrument as other options have different notional values. To learn more about the concept of Notional Value, view this segment of "Ask the Institute."