NISM-Series-VIII: Equity Derivatives · Trading Mechanism

Contract Specifications and Market Lot in Equity Derivatives

Updated 11 October 2026 · Fact-checked

Contract specifications are the standard terms an exchange fixes for a derivative: underlying, lot size, tick size, expiry, contract months and strike intervals. The market lot is the minimum tradable quantity. To find contract value, multiply the price by the lot size. Always use the figures given in the question.

Understand Contract Specifications and Market Lot

A derivative traded on an exchange is standardised. The exchange decides the terms, and you only choose the contract, price and number of lots. This is what lets thousands of traders buy and sell the same contract and lets the clearing corporation guarantee it.

The market lot (lot size) is the fixed quantity of the underlying in one contract. You cannot trade 1 unit. You trade 1 lot, 2 lots and so on. For an index, the lot is a number of index units. For a stock, it is a number of shares. The exchange revises lot sizes from time to time so that contract value stays within the range set under SEBI's framework. So never memorise a lot size as permanent. Exam questions normally give it.

The tick size is the smallest price movement allowed. Index and stock futures and options on NSE trade with a tick of ₹0.05. Prices must move in multiples of the tick. The money value of one tick is tick size × lot size.

Contract months and expiry define life. Exchange-traded futures and options exist in standard expiry cycles, with a few contracts available at a time (for example, near, next and far month). Each contract has an expiry date fixed by the exchange. After expiry the contract ceases to exist. The expiry day and the list of contracts have been changed by regulators and exchanges over the years, so rely on the exam's wording.

For options, the strike price interval is the gap between consecutive strike prices the exchange lists. The exchange sets it based on the price level of the underlying. Higher-priced underlyings generally get wider intervals. Strikes are listed in-the-money, at-the-money and out-of-the-money around the current price.

Key formulas to remember

Contract value (notional value): Contract value = Price of underlying (or futures price) × Lot size × Number of lots; Use the futures price for futures. For options, notional value uses the strike or underlying price, but premium paid is different.
Option premium payable: Premium payable = Premium per unit × Lot size × Number of lots; Paid by the buyer. The seller receives it and pays margin.
Value of one tick: Tick value = Tick size × Lot size; Tick size is ₹0.05 for index and stock futures and options on NSE.
Profit or loss on futures: Long: (Exit price − Entry price) × Lot size × Lots. Short: (Entry price − Exit price) × Lot size × Lots; Ignore charges and taxes unless asked.
Trading quantity rule: Quantity traded = Number of lots × Lot size; Orders are in multiples of the lot. Partial lots are not allowed.

How to solve Contract Specifications and Market Lot questions

Most questions either test a definition or ask you to compute a value from given lot size and price. Use this routine.

1Read what is asked: definition, contract value, premium, tick value or profit and loss.
2Pick out the data given: price, lot size, number of lots, tick size, premium.
3Use only the lot size given in the question, even if it differs from what you remember.
4Choose the right price: futures price for futures, premium for option cost, underlying or strike for notional value.
5Multiply price × lot size × number of lots. Handle the zeros carefully with Indian grouping.
6For profit or loss, take the price difference first, then multiply by the lot size and lots. Check direction: long gains when price rises, short gains when price falls.
7Check the answer is sensible, then eliminate options with wrong magnitude.

Quickest way: Price × lot, then check zeros

When to use it: Use for any calculation question with four numerical options.

Write price × lot size on rough paper.
Round to estimate the size of the answer, for example 24,000 × 75 is about 24 × 75 thousand = 18 lakh.
Eliminate options with a different number of digits.
For tick value, remember it is tick × lot, not tick alone.
For definition questions, look for words like minimum, standardised and fixed by the exchange.

Common mistakes in Contract Specifications and Market Lot

Using a remembered lot size instead of the one in the question
Lot sizes are revised and old figures stay in memory.
Fix: Treat the question's data as the truth. Learn the concept, not the number.
Confusing lot size with tick size
Both are called minimum sizes.
Fix: Lot size is minimum quantity. Tick size is minimum price movement.
Paying or computing option cost as notional value
Students multiply the strike by the lot instead of the premium.
Fix: The buyer pays premium × lot size. Notional value is a different figure.
Forgetting to multiply by the number of lots
Students stop after one lot.
Fix: Re-read the question for words like 'three lots' before the final step.
Assuming strike intervals are the same for all stocks
Index strike gaps feel uniform.
Fix: Remember that the exchange sets intervals by the price level of the underlying, with wider gaps for higher prices.
Thinking an expired contract can still be traded
Mixing up contract month with a rolling series.
Fix: Each contract has a fixed expiry date. After that it ceases to trade, and new contracts are introduced.

Worked examples

Example 1

Nifty futures trade at 24,000. The lot size is 75. A trader buys 2 lots. What is the contract value? (Figures are illustrative.)

Show the solution

Price × lot size = 24,000 × 75 = 18,00,000 for one lot.
Number of lots = 2.
Contract value = 18,00,000 × 2 = 36,00,000.

Answer: ₹36,00,000

Example 2

Tick size is ₹0.05 and lot size is 75. What is the rupee value of one tick for one lot? Options: (a) ₹0.05 (b) ₹3.75 (c) ₹37.50 (d) ₹75

Show the solution

Tick value = tick size × lot size.
0.05 × 75 = 3.75.
Option (b) matches. Option (a) is only the tick, and (d) is only the lot.

Answer: (b) ₹3.75

Exam tips

Expect questions that give lot size and price and ask for contract value, premium or tick value. Practise quick multiplication.
Learn the definitions precisely: market lot is the minimum quantity, tick size is the minimum price movement, and expiry is the last day of the contract.
If an option's trap answer is the same number with different zeros, estimate the size first.
Do not memorise current lot sizes or expiry days. Rules change, and the question usually states them.
Remember strike intervals widen as the underlying price rises.

Practice questions from Trading Mechanism

Contract Specifications and Market Lot: frequently asked questions

What is lot size in equity derivatives?

Lot size is the fixed number of units of the underlying in one contract. You can only trade in multiples of it. The exchange sets it and revises it from time to time.

What is the tick size for Nifty futures?

The tick size is ₹0.05, the smallest allowed price movement. Multiply it by the lot size to get the money value of one tick.

How do I calculate contract value from lot size?

Multiply the futures price or underlying price by the lot size and by the number of lots. For example, price 500 and lot size 200 gives 1,00,000 per lot.

How are strike price intervals decided for stock options?

The exchange decides them based on the price of the underlying stock. Higher-priced stocks generally have wider intervals. Exam questions will give the interval if a calculation is needed.