Job Lot

A job lot is a commodities futures contract with a denomination smaller than the exchange’s standard lot size. The term also appears in manufacturing to describe custom or non-standard production runs that fall outside normal batch sizes.

What a job lot means in finance

Futures exchanges use standardized contract sizes to simplify trading and enable high-volume, fast execution. When a buyer and seller agree to a futures contract for an amount below the exchange’s normal contract size, that agreement is called a job lot. Examples:
* Crude oil futures are commonly quoted with a standard contract of 1,000 barrels; a 100-barrel agreement would be a job lot.
* Some soybean futures correspond to roughly 136 metric tons per contract; any contract below that would be a job lot.

How job lots work

Standardized contracts suit large producers, institutional traders, and hedgers, but they can be too large for smaller firms, commodity users, or retail speculators. Job lots allow these smaller participants to:
* Take positions or hedge exposure at quantities they actually need.
* Avoid the logistical or financial burden of taking delivery of an oversized standard contract.
* Participate in the market without committing the capital required for a full standard lot.

By enabling smaller trades, job lots can increase overall market participation and liquidity, making it easier for all market participants to transact and find prices.

Real-world examples

• Precious metals: If an exchange issues silver futures in 5-ounce increments, an agreement for a smaller quantity (e.g., 1–3 ounces) would be treated as a job lot.
• Energy markets: A buyer needing far less than 1,000 barrels of oil may arrange a job-lot contract to match their physical needs or cash constraints.

Benefits and drawbacks

Benefits
* Greater market access for smaller buyers and sellers.
* More flexible hedging and position sizing.
* Potentially higher aggregate liquidity because more participants can trade.

Drawbacks
* Less uniformity compared with standardized contracts, which can complicate clearing and settlement.
* Job lots may carry proportionally higher transaction or administrative costs.
* Price discovery for very small lots can be weaker if few participants trade those sizes.

Takeaway

A job lot provides a way for smaller market participants to trade futures or manage production requirements at quantities below standard contract sizes. While they increase accessibility and can boost aggregate liquidity, they may introduce tradeoffs in standardization, costs, and ease of settlement.