job lot

What It Is

A job lot is a commodities futures contract where the underlying commodity is denominated in smaller amounts than a regular futures contract.

How It Works

Commodity futures contracts are agreements between a buyer and a seller to deliver a specific amount of a commodity (for example, precious metals, oil, corn, etc.) on a future date at a predetermined price. The denomination amounts are typically very large. Job lots are contracts denominated in smaller amounts, making them accessible to more investors.

For example, a gold futures contract may be issued in denominations of 10 troy ounces. This means that larger contracts increase incrementally to 20, 30, and 40 troy ounces. By contrast, a job lot for gold might be issued in two ounce denominations. This means that the underlying quantity of a gold job lot would rise incrementally to four, and six troy ounces.

Why It Matters

By offering smaller commodity stakes, job lots give investors with less investment capital an opportunity to invest in the commodity futures market.

Source: Investing Answers