how a lot works
investors and traders purchase and sell financial instruments in the capital markets with lots a lot is a fixed quantity of units that depends on the financial security being traded the typical lot size for stocks was round lots of 100 shares until the advent of online trading a round lot can also refer to a number of shares that can be evenly divided by 100 such as 300 1 200 or 15 500 shares 1odd lots and mixed lots are more common an odd lot is an order for less than 100 shares mixed lots are a number of shares above 100 but not divisible by 100 the round lot for exchange traded securities such as an exchange traded fund etf is 100 shares similar to stocks types of lotsthe exact nature of lots depends on what is being traded the bond market is dominated by institutional investors who buy debt from bond issuers in large sums a round lot for u s government and corporate bonds is considered to be 1 million in some circles but it can also be 100 000 this is the case with municipal bonds a trader or investor doesn t have to buy bonds in that quantity bonds typically have a face value of 1 000 to 10 000 and some are even lower an investor can buy as many bonds as they like but it may still be an odd lot a lot in terms of options represents the number of contracts contained in one derivative security one equity option contract represents 100 underlying shares of a company s stock the lot for one options contract is 100 shares let s say that an options trader purchased one bank of america bac call option last month the option has a strike price of 24 50 and it expires this month the options holder can purchase 100 shares of bac at the strike price of 24 50 if they exercise their call option today when the underlying stock is trading at 26 15 one option contract gives an investor the right to purchase the lot of 100 shares at the agreed strike price investors always know exactly how many units they re buying with each contract with this kind of standardization they can easily assess what price per unit they re paying valuing and trading options would be needlessly cumbersome and time consuming without such standardization the smallest options trade an investor can typically make is for one contract this represents 100 shares but it s possible to trade options for a smaller amount with mini stock options that have an underlying share amount of 10 2lots are known as contract sizes in the futures market the underlying asset of one futures contract could be an equity a bond interest rates a commodity an index or a currency the contract size varies depending on the type of contract that s being traded one futures contract for corn soybeans wheat or oats has a lot size of 5 000 bushels of the commodity 3 the lot unit for one canadian dollar futures contract is 100 000 cad it s 62 500 gbp for one british pound contract 12 500 000 jpy for one japanese yen contract and 125 000 eur for one euro futures contract 4the standard contract sizes for options and futures are fixed and non negotiable unlike stocks bonds and etfs in which odd lots can be purchased derivative traders who are purchasing and selling forward contracts can nonetheless customize the contract or lot size of these contracts because forwards are non standardized contracts that are created by the parties involved standardized lots are set by the exchange and they allow for greater liquidity in the financial markets increased liquidity comes with reduced spreads creating an efficient process for all participants involved there are micro mini and standard lots when trading currencies a micro lot is 1 000 of the base currency a mini lot is 10 000 and a standard lot is 100 000 it s possible to exchange currencies at a bank or currency exchange in amounts less than 1 000 but the smallest trade size is typically 1 000 unless expressed stated otherwise if you re trading through a foreign exchange broker 5