What is a Job Lot?
A job lot is a commodities futures contract where the underlying commodity is denominated in smaller amounts than a regular futures contract.
How Does a Job Lot Work?
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 Does a Job Lot Matter?
By offering smaller commodity stakes, job lots give investors with less investment capital an opportunity to invest in the commodity futures market.