The term tick size refers to the minimum price increment by which a stock, futures contract, or exchange-traded instrument can increase or decrease. While the tick size for common stock is standardized, it will vary by the underlying asset type in the futures market.
The minimum price movement of a trading instrument (common stock, option, futures contract) is referred to as its tick size. These discrete price levels were established to create a balance between time preference and price preference. For example, if a tick is too small (price priority) then traders have little incentive to place orders in advance, since another trader can move ahead of them using a price that is virtually the same. The opposite happens if the tick is too large (time priority), since traders will have to wait until the value of the underlying moves enough to satisfy the tick size before a new bid can be placed.
The minimum price movement of a common stock is $0.01, or one cent in terms of USD. Futures contracts have a standardized but varying tick size that, when coupled with a standard contract size, produces a tick value. This value is the impact the tick size has on a standard contract as shown in the examples below:
Product | Contract Size | Tick Size | Tick Value |
Gold | 100 troy ounces | $0.10 | $10.00 |
Euro (currency) | 125,000 euro | $0.0001 | $12.50 |
Crude Oil (mini) | 500 barrels | $0.025 | $12.50 |
Note: Multiplying the tick size by the contract size produces the tick value.
underlying asset, transaction cost, trading pit, adjusted futures price
Explore Investing Further
Trading has never been easier, thanks to the rise of online platforms that enable you to buy and sell various assets at the click of a button. But with so many options available, it can be challenging to decide which platform is right for you.
Looking for a way to avoid swap fees while trading forex?
Below listed are the small reviews of the top 10 ETF brokers available across the United States.
Our top beginner's pick for copy trading is eToro. Read on for more details, plus seven good alternatives.
Swing trading stocks can be a great way for investors to take advantage of short-term stock market movements and gain significant returns. If you're interested in swing trading, the key to success lies in selecting the right stocks to buy and sell quickly for a profit.
The table below lists the best stock picks under $2, listed on public exchanges.
The table below lists the best stock picks under $1, listed both on public and OTC exchanges.
This section will highlight the best EV-trading penny stocks available in the United States.
The demand for sustainable energy has grown rapidly in recent years. This has resulted in increased scrutiny of the automotive market. As a result, the electric vehicle (EV) industry has made significant advancements.
Intelligent Bio Solutions Inc. is a life sciences company, founded in 2016 with headquarters in New York and is engaged in performing diagnostic tests, real-time monitoring, and non-invasive surgery for its patients. The firm has developed a CoV-2 Biosensor, which can be used in RNA virus detection.
Hour Loop was founded in 2013 with headquarters in Redmond, Washington. It’s an online retailer involved in e-commerce in the United States that hit the public markets on Jan 7th of 2022. The company sells home/garden decor, electronic products, kitchenware, and apparel through walmart.com, amazon.com, and hourloop.com.