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Definition: Contract Size
Contract size or lot size represents a specific quantity of a commodity which is to be delivered according to the futures contract or agreement. The commodity may be stock, futures or options. Generally the contract size is standard for futures and options but may vary depending upon the commodity or agreement.
For example: contract size for options is generally 100 shares but contract size for gold on COMEX is 100 ounces.
Contract size determines the change in dollar value of a unit change in the underlying commodity. His can be explained by giving an example. Suppose the price of gold changes by 1$, therefor there will be 100$ change (as lot size is 100 ounces) in the gold contract.
In Forex, contract size is the amount of currency being bought and sold. There are two types of contract sizes here:-
• Standard contract size : 100,000 base currency units
• Mini contract size: 10,000 base currency units.
Similarly for every commonly traded quantity a contract size is specified.