Lot size in house
Family III · Risk
Not to be confused with lot, lot sizes, position size.
Lot size in house is an internal risk convention, not an exchange specification. It defines how a firm groups contracts or shares for its own limit monitoring, margin calculations and P&L attribution. The same underlying position can therefore have different in-house lot sizes at different firms, or even across desks within one firm.
How an in-house lot is set
Firms derive the in-house lot from their own risk appetite, the liquidity of the instrument and the granularity of their reporting systems. A desk trading a highly liquid futures contract might use one contract as the in-house lot, while a desk trading a less liquid instrument might group ten contracts into one in-house lot to reduce administrative noise. Because the definition is internal, it can be changed by risk committee decision and does not need to match any exchange or regulatory lot size.
Worked example
The desk reports 7.4 in-house lots against a limit expressed in the same unit. If the limit were 7 in-house lots, the position would breach it even though the exchange contract count alone gives no such signal.
Why the distinction matters
Risk reports, margin calls and trader mandates often quote in-house lots rather than exchange contracts. A trader who assumes the two are identical can misread a limit breach or misstate exposure. The in-house lot is also the unit used when a firm aggregates positions across accounts or legal entities for internal capital allocation.
Often confused with
- lot
- A lot is the standardised quantity defined by the exchange or venue for a listed contract, whereas an in-house lot is a firm's internal grouping; the visible sign is that the exchange lot size appears in the contract specification, while the in-house lot appears only in the firm's risk documentation.
- lot sizes
- Lot sizes are the published schedule of tradeable quantities for an instrument, while an in-house lot is a single internal grouping chosen by one firm; the visible sign is that lot sizes are plural and instrument-wide, whereas an in-house lot is singular and firm-specific.
- position size
- Position size is the actual quantity of an instrument held or traded, while an in-house lot is the unit used to express that quantity for internal limits; the visible sign is that position size changes with every fill, whereas the in-house lot definition stays fixed until the firm changes it.