Price versus amount

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Quick primer for legal eagle types, who tend not to differentiate between them, that there is a useful distinction between “price” and “amount” in, say concepts like “purchase price” and “purchase amount”.

Price is a value per unit.

Amount is the total value of all units.

Mixing them up, can of course make for absurdities. This is particularly painful when documenting swap confirmations which might refer to notional amounts, or “lots”, which themselves may comprise multiple underliers. One ICE Endex EUA future is an entitlement to be delivered 1000 EU emission allowances, each of which entitles you to discharge one metric tonne of carbon dioxide.

So the price per allowance may be EUR90. But the price per future may be EUR90,000. And if you are trading 10,000 futures, the purchase amount may be EUR900,000,000.

Why does it matter? Well the price for one apple maybe 20 pence. If you buy one, the purchase amount is the same: 20 pence. But if you buy 1,000, the price may be 14 pence.