In the world of finance, the standardized number of units of a financial instrument as set out by an exchange or similar regulatory body is referred to as the ‘lot’.
The number of units is determined by the lot size. In the bond market, most bonds marketed towards retail investors trade in a lot size of 1000, although some other bonds may trade in lots of 100,000.
The term ‘lot’ refers specifically to the smallest available position size or unit that can be traded in a given market. The specific amount of money assigned to a lot is known as a ‘lot size’.
Trade and lot size refer to the total amount traded and the scale at which a bond is traded at. Therefore, most exchanges operate with a ‘minimum lot size’ and a ‘lot size’. The minimum lot size is the minimum nominal amount of a bond you can trade. Most retail traded bonds have a minimum lot size of $/€ 1,000. The lot size is the incremental nominal amount that can be traded.
Example: An issuing company has its bonds issued in global form in denominations of $/€100,000 (minimum lot size) and in integral multiples of $/€1,000 (lot size) in excess. Thereore, the minimum amount that can be traded is $/€100,000. Anything above this
Amount means that the bond can be traded in nominal sizes of 101,000; 102,000; 103,000 and so on. Each time the amount increases with the lot size.