Buy And Sell Lots is depend on several things, which are explained in this article. In the share market, the financial instruments are traded in lot sizes. A lot size refers to a standard amount of a particular tradable asset allowed to trade in the stock exchanges.
The size of a lot may vary depending on the price of a particular company’s share, or it may be country-specific.
Generally, they are traded in a lot size of 100, but if a share is costly, then it may be sold in a lot size of 10 also.
Shares are purchased, held, and sold in a fixed lot size in the share market.
There are two types of lot sizes –
- Round lot – A collection of a hundred stocks or financial entities is termed a round lot.
- Odd lot – A group of stocks that are less than a hundred in numbers is called an odd lot.
A trader can buy any number of lot sizes according to his capital and risk-taking capabilities. For example, if someone buys 1200 shares, they are collectively termed a 12-round lot. And if someone buys 1050 shares, they are called a 10-round lot and one odd lot for 50 shares.
Different financial entities are traded in various lot sizes. For example, bonds are traded in lots of $10,000, having face values of $1000 each.
Futures and options are traded in a lot of 100 shares. However, the underlying asset price is fixed for the lot size of the contract.
And finally, forex is traded in 3 different lot-size viz- micro, mini, and standard.
Buying and Selling lots and contracts
Now for buying and selling lots and contracts, there are certain things that a trader needs to do but before doing that, let us first know about the types of arrangements.
There are two types of contracts – one is forward contracts and another one is future contracts. Trading in forwarding contracts is also known as spot trading.
In this type of contract, the commodity is brought at an agreeable price between the two parties. Also, the delivery of the lot is done on the same day.
On the other hand, a different type of contract is a futures contract. In this, the product quality and quantity are negotiated when signing the contract. Besides, the price is also negotiated on the same day. However, the pay-outs are made on the day the delivery is taken.
These contracts are also termed options and futures in commodities dealings.
We will now learn how to buy and sell a lot or a contract.
How To Buy and Sell Lots?
How to buy a lot?
- Buying a lot needs a trading account that is registered with a broker. In addition, one has to open a Demat account to purchase a lot.
- Once the account is opened, one has to decide whether he has to buy a lot of stocks, forex, indices, or commodities.
- After deciding about the type of financial instrument, one has to determine the lot size of the quantity.
- Choosing the lot size of financial instrument in different lots has already been described in this article above.
- So, after choosing the lot size, one should confirm whether he wants to buy the option or the future?
- Now, if someone wants to buy the future of a company asset, then one entity of the future means 100 shares of that company that are traded based on a lot.
- And if someone wants to buy options, he can do so with put and call options. These options are perfect constraints for a trader who plays a day trading game.
- Options are purchased by entering the stick price. Stick price is the price at which the security is purchased.
How do you sell a lot?
- Selling an option is done in spot markets, but for future contracts, one has to wait until the contract’s maturity. Upon maturity of a contract, a seller can sell the futures contract. It is called a set of Contracts.
- If someone wants to sell his future contract on expiry, he can get the profit or undergo loss depending on the closing price of that share on that particular day.
- And if someone wants to sell it before the maturity of the contract, then he can communicate with the broker (Capitalix), and that will find him the buyer.
- And after all, the seller can sell his contracts on the current market prices of that particular future and bear the loss of the profit accordingly.
Hopefully, the idea of indices trading must be clear. Therefore, the other following segment of the course contains the concept of how to buy and sell lots and contracts in the indices market.