Futures exchange
A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts defined by the exchange. Futures contracts are derivatives contracts to buy or sell specific quantities of a commodity or f ...
s establish a minimum amount that the price of a commodity can fluctuate upward or downward. This minimum fluctuation (trade increment) is known as a tick or commodity tick. Hence, a tick is any fluctuation in the price of a
security
Security is protection from, or resilience against, potential harm (or other unwanted coercive change) caused by others, by restraining the freedom of others to act. Beneficiaries (technically referents) of security may be of persons and social ...
.
Each
futures contract
In finance, a futures contract (sometimes called a futures) is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The asset ...
has a different size, quantity, valuation etc., so each
tick size
In financial markets, the tick size is the smallest price increment in which the prices are quoted. The meaning of the term varies depending on whether stocks, bonds, or futures are being quoted.
Bonds
U.S. mortgage bonds and certain corporate bon ...
that can be applied to any one futures contract, is dependent on the previous variables.
Tick size is important as it determines the possible prices available. For example, each "tick" for the
grain market
The grain trade refers to the local and international trade in cereals and other food grains such as wheat, barley, maize, and rice. Grain is an important trade item because it is easily stored and transported with limited spoilage, unlike other ...
(soybeans, corn and wheat) is 0.25 cents per bushel, on one 5,000-bushel futures contract.
See also
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Percentage in point
In finance, specifically in foreign exchange markets, a percentage in point or price interest point (pip) is a unit of change in an exchange rate of a currency pair.
The major currencies (except the Japanese yen) are traditionally priced to fou ...
(PIP)
*
Tick size
In financial markets, the tick size is the smallest price increment in which the prices are quoted. The meaning of the term varies depending on whether stocks, bonds, or futures are being quoted.
Bonds
U.S. mortgage bonds and certain corporate bon ...
*
NASDAQ futures NASDAQ futures are financial futures which launched on June 21, 1999. It is the financial contract futures that allow an investor to hedge with or speculate on the future value of various components of the NASDAQ market index.
Several futures inst ...
References
External links
Futures Contract Specifications (Tick Values)
Derivatives (finance)
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