### What is an Aggregate Exercise Price

An aggregate exercise price is the value traded of the underlying asset if the holder exercises its options contract. In other words, it is the amount of money needed to buy, for a call, or sell, for a put all the underlying asset represented by the options contract.

The calculation is the strike price the option multiplied by its contract size. In the case of a bond option, the exercise price is multiplied by the face value of the underlying bond. The premium paid to acquire the option is not counted.

### BREAKING DOWN Aggregate Exercise Price

The aggregate exercise price is in effect the total exercise value.

The purpose for calculating the aggregate exercise price is to determine how much money the purchaser of the underlying asset must have in order to complete the exercise transaction.

### Example - Equity Options

For an equity option, the aggregate exercise price is the contract size, times the number of contracts, times the exercise price (the strike price).

For company ABC, each contract commands 100 shares of stock. Therefore, for a call option with a 5-contract lot with a strike price of $40.00, the aggregate exercise price would be:

100 shares/contract * 5 contracts * $40.00 or

100 * 5 * 40.00 = $20,000

To exercise this call option, the holder would need $20,000 to pay the seller in order to take delivery of 500 shares of company ABX stock.

### Example - Bond Options

There is not much difference between the calculation of a bond option and a stock option. Each trades in specified units so the value of the exercised option must be consistent with these values.

For a bond option, the aggregate exercise price is the bond face value, times the number of contracts, times the exercise (strike) price.

For bond XYZ, each contract typically covers one bond which has a face value of par, or 100% and the options strike price is also quoted in percentage of par. For most bonds this translates into $1000 of value. Therefore, for a call option on a 5-bond lot with a strike price of 90, the aggregate exercise price would be:

1 face value * 5 bonds per contract * (90% of $1000) or

1 * 5 * 900 = $4,500

To exercise this call option, the holder would need $4,500 to pay the seller in order to take delivery of 5 bonds of issuer XYZ.

Keep in mind that call options profit when the underlying bond moves higher in price. Conversely, this means they also profit when the relevant interest rate moves lower, since bond prices and interest rates necessarily move in opposite directions.