Lot Size In Options Trading

22 May 2025

JM Financial Services

If you're just getting started with options trading, you’ve probably come across the term “lot size” more than once. Maybe you've seen it on your trading platform or heard someone mention it in a YouTube tutorial and wondered—what exactly is a lot size?

Whether you’re trading NIFTY, BANKNIFTY, or stock options in India, understanding lot size is crucial. It’s one of those fundamental pieces that forms the foundation of smart trading. In this post, I’ll break down what lot size is, how it works in options trading, and why it matters—especially when managing risk and capital.

What is Lot Size in Options Trading?

To put it simply, a “lot” in options trading refers to a standardized number of units or contracts you must buy or sell at once. You can’t just buy 1 share or 5 shares of an option contract like you might do in regular equity trading.

In options trading, every trade happens in fixed groups—these groups are called lots.

For example:

NIFTY options have a lot size of 50
BANKNIFTY options have a lot size of 15
A stock like Reliance might have a lot size of 250 (just for illustration)

That means when you buy 1 NIFTY options contract, you're actually trading 50 units—not just 1.

So if the premium (price per unit) is ₹100, the total cost of 1 lot is ₹100 x 50 = ₹5,000.

Lot size is set by the exchange (NSE in India’s case) and is the same for everyone. These sizes aren’t random—they’re designed to keep the contract values meaningful, manageable, and aligned with market liquidity.

Importance of Lot Size?

Why not just let people trade 1 unit if they want?

There are a few solid reasons why exchanges fix a lot size:

Standardization: It creates a uniform structure for trading. Every trader knows what they’re getting into.
Liquidity: Fixed lot sizes help maintain consistent demand and supply for contracts.
Risk Management: It keeps speculation in check by ensuring traders commit a certain amount of capital.
Trading Efficiency: It’s easier for brokers, clearinghouses, and the exchange to match trades and settle them when sizes are standardized.

How is Lot Size Determined?

In India, NSE (National Stock Exchange) determines the lot sizes for index and stock options. These can change from time to time based on a few factors:

Price of the underlying asset (i.e., the stock or index)
Volatility
Liquidity
Market participation

NSE typically aims to keep the notional value of one lot around ₹5 lakhs. So, if a stock price rises sharply over time, NSE may reduce the lot size to maintain that ₹5 lakh value per contract. Likewise, if the stock falls significantly, they might increase the lot size.

Example: If a stock’s price is ₹1,000, and the lot size is 500, the notional value is ₹5,00,000. But if the stock price rises to ₹2,000, the same lot now represents ₹10,00,000—so NSE might reduce the lot size to 250 to maintain balance.

Current Lot Sizes: A Quick Glance (Subject to Change)

NIFTY 50: 50
BANKNIFTY: 15
FINNIFTY: 40
RELIANCE: 250
TCS: 150
INFY: 300

Impact of Lot Size on Trading:-

Capital Requirement

The lot size directly affects how much money you need to trade. If you're buying a call option on a stock with a ₹20 premium and a lot size of 250, you’ll need ₹5,000 (₹20 x 250). So even a small difference in lot size can impact your capital requirement significantly.

Profit & Loss (P&L)

Since each contract covers multiple units, your profits (or losses) multiply accordingly.

Example:

You buy 1 lot of BANKNIFTY Call @ ₹100
Lot size = 15
If premium goes to ₹140, you gain ₹40 per unit
Your total gain = ₹40 x 15 = ₹600

On the flip side, losses work the same way. It’s important to be aware of this leverage.

Margin Requirement

If you’re writing (selling) options, you need to maintain a margin with your broker. Larger lot sizes can lead to higher margin requirements. Brokers usually show the margin needed upfront when you initiate a trade.

Position Sizing

For traders who manage risk carefully (which should be everyone), lot size is key. You can’t reduce your position below one lot, so you must plan your trades accordingly. It also means you might not be able to scale your position in smaller increments unless your capital allows multiple lots.

Lot Size vs. Retail Trading Mindset

One of the challenges newer traders face is adjusting to the fact that you can’t trade in 1s and 2s like in stocks. You must always deal in full lots.

Some tips to help you adapt:

Always calculate total cost before placing an order (premium x lot size)
Avoid overleveraging just because the premium seems “cheap”
Use demo accounts to get comfortable with lots before going live

What Happens When Lot Size Changes?

Every once in a while, NSE revises lot sizes—especially when there's a big price movement in the underlying.

For example:

Stock price doubles → Lot size may be halved
Stock price halves → Lot size may be doubled

These changes apply from a specific expiry date and are usually announced in advance. So, if you already have open positions, check if the new sizes will impact you.

Can You Trade Half a Lot?

Nope. It’s not possible to trade half a lot or any fractional amount. All trades must be in full lot multiples—1 lot, 2 lots, 3 lots, and so on. If you try placing an order for anything other than the designated lot size, it will be rejected by the system.

Final Thoughts

Understanding lot size in options trading might seem like a small detail, but it’s actually a big piece of the puzzle. It influences how much money you need, how much you can make (or lose), and how you plan your trades.

As a trader, your job isn’t just to pick the right stock or strike price—it’s also to understand the mechanics of how trading works. And lot size is one of those core mechanics you don’t want to overlook.

Before entering any trade, pause and check: