how job lots work
today s commodity futures exchanges are a large and important part of the global financial markets through them producers can access the vital commodities they need while financial buyers can speculate on commodity prices and control risks through hedging activities one of the key components of this system is the fact that commodity exchanges use standard contracts this greatly simplifies the trading system and allows transactions to take place in large volumes and at high speeds oftentimes however the standard contract sizes for commodity futures could be prohibitively large for smaller companies and investors for instance the chicago mercantile exchange cme s futures contract for soybeans corresponds to roughly 136 metric tons of soybeans per contract 1 a relatively small buyer who intends to take physical delivery upon expiration of the contract might not need that quantity of supply similarly a speculator with relatively limited capital to invest might be reluctant to speculate on soybean futures if they risk being forced to potentially take delivery of such a large volume of soybeans to help accommodate these smaller market participants commodities exchanges sometimes permit smaller order sizes these job lot futures contracts permit smaller denominations such as 100 barrels of oil as compared to the standard 1 000 by allowing smaller investors to participate in the futures market job lots help increase the total liquidity of the marketplace making it easier for all traders to benefit from fast transaction times and relatively efficient prices real world example of a job lotfutures contracts are typically standardized and trade on a futures exchange a futures contract is considered a job lot when the agreement between the buyer and seller for the delivery of a commodity has a quantity below the normal limits for a commodity futures contract for example precious metals such as gold and silver are often bought and sold as commodities futures contracts a commodities exchange might issue silver futures contracts denominated in 5 ounce increments if the exchange agreed to enter into a commodity futures contract with a buyer below the 5 ounce minimum it would be considered a job lot 