Lot

Loading the player...

DEFINITION of 'Lot'

In general, any group of goods or services making up a transaction. In the financial markets, a lot represents the standardized quantity of a financial instrument as set out by an exchange or similar regulatory body. For exchange-traded securities, a lot may represent the minimum quantity of that security that may be traded.

BREAKING DOWN 'Lot'

In terms of stocks, the lot is the number of shares you purchase in one transaction. In terms of options, a lot represents the number of contracts contained in one derivative security.

The concept of lots allows the financial markets to standardize price quotes. For example, equity options are priced such that each contract (or lot) represents exercise rights for 100 underlying shares of common stock. With such standardization, investors always know exactly how many units they are buying with each contract and can easily assess what price per unit they are paying. Without such standardization, valuing and trading options would be needlessly cumbersome and time consuming.

RELATED TERMS
  1. Mini-Lot

    A currency trading lot size that is 1/10 the size of the standard ...
  2. Even Lot

    A normal unit of trading for securities or bonds. An even lot ...
  3. Odd Lot

    An order amount for a security that is less than the normal unit ...
  4. Job Lot

    A futures contract with a minimum trading unit smaller than the ...
  5. Odd Lot Theory

    A technical analysis theory/indicator based on the assumption ...
  6. Board Lot

    A standardized number of shares defined by a stock exchange as ...
Related Articles
  1. Investing Basics

    What is a Lot?

    The term “lot” refers to any group of goods or services that make up a transaction.
  2. Active Trading Fundamentals

    Playing It Safe With Trades? Or Holding Yourself Back?

    Fear of breaking out of a comfort zone can prevent an investor from reaching his or her full potential.
  3. Investing Basics

    Principal Trading and Agency Trading

    Ever wonder what happens behind the scenes when you buy or sell a stock? Read on and find out!
  4. Forex Education

    Forex Trading The Martingale Way

    Martingale's mechanics involve an initial bet; however, each time the bet becomes a loser, the wager is doubled such that, given enough time, one winning trade will make up all of the previous ...
  5. Taxes

    Using Tax Lots: A Way To Minimize Taxes

    The method of identifying cost basis can help you to get the most out of reduced tax rates.
  6. Term

    Understanding Market Price and Its Changes

    An asset’s or service’s market price is the current price at which it can be bought and sold.
  7. Options & Futures

    What Does Quadruple Witching Mean?

    In a financial context, quadruple witching refers to the day on which contracts for stock index futures, index options, and single stock futures expire.
  8. Professionals

    Is A Stockbroker Career For You?

    Becoming a stockbroker requires a broad skill set and the willingness to put in long hours. But the rewards can be enormous.
  9. Options & Futures

    4 Equity Derivatives And How They Work

    Equity derivatives offer retail investors opportunities to benefit from an underlying security without owning the security itself.
  10. Options & Futures

    Five Advantages of Futures Over Options

    Futures have a number of advantages over options such as fixed upfront trading costs, lack of time decay and liquidity.
RELATED FAQS
  1. What's the smallest number of shares I can buy?

    Unlike mutual funds, which can be purchased in fractional units, shares of stock cannot be divided. So, the smallest number ... Read Full Answer >>
  2. How does leverage affect pip value?

    A standard forex account has specific lots and pip units. A lot is the minimum quantity of a security that may be traded, ... Read Full Answer >>
  3. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  4. What is after-hours trading? Am I able to trade at this time?

    After-hours trading (AHT) refers to the buying and selling of securities on major exchanges outside of specified regular ... Read Full Answer >>
  5. How do hedge funds use equity options?

    With the growth in the size and number of hedge funds over the past decade, the interest in how these funds go about generating ... Read Full Answer >>
  6. Can mutual funds invest in options and futures? (RYMBX, GATEX)

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
Hot Definitions
  1. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  2. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  3. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  4. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  5. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  6. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
Trading Center