Lot
Family I · Instruments
Not to be confused with contract size, lot size, forex lot size, lot sizes.
Lot is the trading unit that expresses order size, not a fixed number of shares or coins across all markets. The quantity it represents is defined by the instrument's contract specification, which varies by exchange, broker and asset class. A lot is therefore a counting convention: it tells a trader how many units are being bought or sold.
How lot size is set
The number of underlying units in one lot is not universal. For exchange-traded derivatives, the contract specification states the multiplier or deliverable quantity. For spot forex and contracts for difference, the broker or platform defines the lot convention, which may differ from the exchange-traded standard. For shares, one lot may be a single share or a board lot fixed by the exchange.
Because the definition is contract-specific, the same word can describe different quantities in different markets. A trader must check the instrument's specification before calculating exposure.
Worked example: calculating units from lots
Suppose an instrument's contract specification states that one lot equals 100,000 units of the base asset. A trader buys 0.25 lots.
The result is the number of underlying units represented by the order. If the specification instead defined one lot as 10,000 units, the same 0.25 lots would represent 2,500 units.
Lots and position sizing
Position size is often expressed in lots because it simplifies order entry and comparison across instruments. The monetary value of a position depends on both the number of lots and the price per underlying unit. Two instruments with the same lot count can have very different notional values if their contract specifications differ.
Lot conventions also affect minimum trade sizes and increments. Some markets allow fractional lots, while others require whole lots. These rules are set by the venue or broker and are not uniform.
Often confused with
- contract size
- Contract size is the number of underlying units in one contract, while a lot is the trading unit whose size is defined by that contract specification; the visible sign is that contract size is a fixed property of the instrument, whereas lot is the quantity being traded.
- lot size
- Lot size is the number of units contained in one lot, while a lot is the unit itself; the visible sign is that lot size answers 'how many units per lot' and lot answers 'how many lots'.
- forex lot size
- Forex lot size is the unit quantity convention specific to spot forex, while a lot is the general trading unit used across asset classes; the visible sign is that forex lot size applies only to currency pairs.
- lot sizes
- Lot sizes is the plural form referring to multiple lot conventions or the available increments, while a lot is a single trading unit; the visible sign is that lot sizes appears when comparing or listing different unit quantities.