Series VIIIEasyIntroduction to Derivative Markets

In equity derivatives, the 'lot size' of a contract refers to:

AThe fixed number of units of the underlying that make up one contractcheck_circle
BThe tick size of the contract
CThe minimum margin required to trade
DThe maximum number of contracts one can hold

Correct answer

A. The fixed number of units of the underlying that make up one contract

lightbulbDetailed Solution

Lot size (contract size) is the standardised quantity of the underlying represented by one derivative contract. Exchanges fix it so that the contract value meets the minimum notional prescribed by SEBI. Trades happen only in multiples of the lot size.

Reference: NISM Series VIII Equity Derivatives, Chapter 1.

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