Tick value
Family I · Instruments
Not to be confused with notional value, tick size.
Tick value is the cash amount that one minimum price movement of a contract or instrument is worth. It is derived from the tick size, which is the smallest permitted price increment, multiplied by the contract's point value or lot multiplier. Tick value therefore converts a price move into a profit or loss figure, and it varies by instrument and by contract specification.[1]
How tick value is calculated
Tick value is the product of two inputs: the tick size, quoted in price units, and the value of one full price point for the position being traded. For a futures contract, the point value is set in the contract specification. For a share or currency position, the equivalent figure depends on the position size.
The formula is:
- Tick value = tick size × point value
Because both inputs are contract-specific, tick value differs between instruments and can differ between contracts on the same underlying. It is not a universal constant.
Worked example
A move of four ticks in this contract is therefore worth 20 currency units per contract held, before commissions and fees.
Why it matters
Tick value allows a price movement to be translated directly into money. Traders use it to compare the cost of a stop distance across instruments, to size positions so that a given adverse move equals a chosen cash amount, and to assess whether a strategy's edge exceeds the spread and commissions, which are also quoted in ticks.
Where a broker or exchange publishes contract specifications, the tick size and point value are stated there; the resulting tick value is a calculation, not a separate quoted figure.
Often confused with
- notional value
- Notional value is the total face value of the position, whereas tick value is the money represented by one minimum price increment; the visible sign is that notional value changes with the number of contracts or units held, while tick value per tick does not.
- tick size
- Tick size is the minimum price increment expressed in price units, whereas tick value expresses that same increment in money; the visible sign is the unit of measurement, points or currency versus cash.
See also
References
- ↑ Contract specifications published by the broker or exchange for each instrument. Lot sizes, tick sizes and pip values are set per instrument and differ between venues; read the specification for the symbol you trade.