Contract Specs: Multiplier and Tick Size
How much of the underlying is in one futures contract? How much is one price tick worth? Read the contract specs to get your P&L right.
Risk warning: forex, CFDs, options, futures and crypto assets usually involve leverage or high volatility, and you can lose more than you put in. This lesson only teaches the concepts; all numbers are for illustration and are not investment advice.
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Text version · Futures Basics, lesson 2: “Contract Specs: Multiplier and Tick Size”
How much of the underlying is in one futures contract? How much is one price tick worth? Read the contract specs to get your P&L right.
1 contract stands for a large amount of goods
The contract size tells you how much of the underlying 1 contract stands for. For every $1 the price moves, 1 crude oil contract gains or loses $1 × 1,000 barrels = $1,000.
Prices move tick by tick
A tick is the smallest step the price can move. Tick value = tick × multiplier, and it decides how much your account changes for each “tick”.
1 contract is a big trade
Contract value = price × multiplier. 1 crude oil contract at $80 × 1,000 barrels = $80,000; 1 stock index contract at 5,000 points × $50 = $250,000. A tiny price move means P&L in the thousands.
Key takeaways
- Contract size: how much of the underlying one contract represents, e.g. 1 crude oil contract = 1,000 barrels.
- Tick: the smallest step the price can move; tick value = tick × contract size.
- P&L = price change × contract size × number of contracts = ticks moved × tick value × number of contracts.
- Contract value = price × contract size. One contract is often worth tens or hundreds of thousands of dollars, so work out what each tick is worth first.
Try it yourself
You can do these exercises in this lesson's interactive simulation:
- Click “Example: crude $80→$81”: how many ticks did the price move? What's the P&L on 1 long contract?
- Click “Example: stock index 1 tick”: 0.25 points × $50 per point, what's one tick worth?
- Switch to "Gold", set the contracts to 3 and click the green "10 ticks" again: is the P&L 10 ticks × $10 × 3 = $300? What does the "Contract value" card show?
- Switch through the four commodities and note each one's tick value: which ones have the same value per tick?
Quiz and explanations
- 1. Crude oil futures have a contract size of 1,000 barrels. The price rises from $80 to $81. What's the P&L on 1 long contract?
- Answer: +$1,000.$1 × 1,000 barrels = $1,000.
- 2. A contract has a tick of 0.25 points, and each point is worth $50. How much is 1 tick worth?
- Answer: $12.50.0.25 × $50 = $12.50.
- 3. A gold futures contract is 100 ounces with a $0.10 tick. The price rises from $2,400.0 to $2,403.5. What's the P&L on 3 long contracts?
- Answer: +$1,050.Price change $3.5 × 100 ounces × 3 contracts = $1,050 (that is, 35 ticks × $10 × 3).
Terms in this lesson
- contract size (Contract Size): How much of the underlying one futures contract represents; for example, 1 crude oil contract = 1,000 barrels.
- notional value (Notional): The total value of the asset a position controls; for example, 1 lot of EUR/USD ≈ $108,500.
- tick (Tick): The smallest amount a price can move; the value of 1 tick = tick size × contract size.