Lot

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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.

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