Table of Contents
What Is a Job Lot?
Let me explain what a job lot is in finance: it's a commodities futures contract with a smaller denomination than the standard lot size for that commodity. For instance, if the standard for crude oil futures is 1,000 barrels per contract, anything less than that counts as a job lot.
You should also know that in manufacturing, the term job lot applies to custom jobs that don't fit the usual production parameters.
Key Takeaways
- A job lot is a futures contract with a denomination below the standard lot.
- It can also mean a non-standard job in manufacturing.
- In commodities futures, job lots let smaller buyers join in, boosting liquidity for everyone.
How Job Lots Work
Commodity futures exchanges are a big deal in global finance today. They let producers get the commodities they need, and financial players can speculate or hedge risks. A key feature is the use of standard contracts, which makes trading straightforward, high-volume, and fast.
But standard sizes can be too big for smaller companies or investors. Take the CME's soybean futures: that's about 136 metric tons per contract. If you're a small buyer planning to take delivery, you might not want that much. Or if you're a speculator with limited funds, you might avoid it to not risk handling such a large amount.
That's where job lots come in. Exchanges allow these smaller orders, like 100 barrels of oil instead of 1,000. This opens the door for smaller participants, increasing overall market liquidity so everyone gets faster trades and better prices.
Real World Example of a Job Lot
Futures contracts are standardized and traded on exchanges. A job lot happens when the buyer-seller agreement for commodity delivery is for a quantity below the normal minimum.
Consider precious metals like gold and silver, traded as futures. An exchange might have silver contracts in 5-ounce increments. If they agree to a contract below that 5-ounce mark, it's a job lot.
Other articles for you
The foreign exchange market, or forex, is a global decentralized network for trading currencies, determining exchange rates, and offering various transaction types like spot, forwards, and futures.
Double-spending is the risk of spending the same digital token more than once in blockchain systems, prevented by mechanisms like proof-of-work and consensus.
Just in Case (JIC) is an inventory strategy where companies maintain large stocks to avoid stockouts despite unpredictable demand.
The Australian Securities Exchange (ASX) is a key financial hub in Sydney that operates as a market, clearinghouse, and payments system while emphasizing education and electronic trading.
The substitution effect explains how consumers switch to cheaper alternatives when a product's price rises, impacting demand based on availability of substitutes.
The True Strength Index (TSI) is a momentum oscillator used in technical analysis to identify market trends, reversals, overbought/oversold conditions, and potential divergences.
A variance swap is a financial derivative for hedging or speculating on an asset's price variance.
Modified duration measures how much a bond's price changes with a 1% shift in interest rates, building on Macaulay duration to help investors assess risk.
Usury laws in the US protect consumers by capping interest rates on loans, with regulations set by individual states rather than federally.
After-tax contributions involve paying taxes upfront on money added to retirement accounts like Roth IRAs, offering tax-free withdrawals later, unlike pre-tax options in traditional accounts.