Module 6 · Lesson 11 of 17 · Risk, process, and mindset · About 5 minutes
Sizing Futures Positions in Contracts: Ticks, Tick Value and Whole Numbers
On this page
Before you read: Futures Contract Specifications: Size, Tick, Multiplier and Months
What you will learn
- Convert a chosen stop distance in ticks to a planned dollar loss per contract.
- Include a cost allowance with explicit per-contract, round-trip units.
- Divide a fictional planned amount by that per-contract amount and round down to whole contracts.
- Distinguish planned stop-loss arithmetic from actual execution losses and margin requirements.
- How micro contracts change the arithmetic, and what this math leaves out.
How is the loss per contract calculated?
If the stop distance is 12 ticks, what does one contract cost in the example?
Use these fictional assumptions throughout this example:
| Input | Standard-sized contract | Micro-sized contract |
|---|---|---|
| Tick size | 0.25 price point | 0.25 price point |
| Dollars per price point per contract | $20 | $2 |
| Tick value | 0.25 × $20 = $5 | 0.25 × $2 = $0.50 |
| Entry-to-stop distance | 12 ticks = 3 points | 12 ticks = 3 points |
| Entry plus exit fees/cost allowance | $2 per contract round trip | $0.80 per contract round trip |
Here round trip means the combined entry-and-exit allowance for one contract. It is not a fixed fee for the whole position, not a per-side fee to be doubled again, and not a current real-world quote. No separate slippage is assumed in this first calculation.
Planned amount per contract = stop-distance ticks × tick value + per-contract round-trip allowance.
- Standard: 12 ticks × $5/tick/contract + $2/contract = $62 per contract.
- Micro: 12 × $0.50 + $0.80 = $6.80 per contract.
These are amounts used in a plan, not guaranteed maximum losses. The assumed stop fill is a calculation input, not an execution promise.
Contract sizing diagram
Read the diagram step by step
- Fictional values only. Comparison risk budget: $300. Not a real contract or fee quote.
- Standard-sized contract Per-contract input units: Tick size: 0.25 price point/tick. Point value: $20/point/contract. Stop distance: 12 ticks = 3 points.
- 1. Convert the tick value 0.25 point/tick × $20/point/contract = $5/tick/contract.
- 2. Stop amount plus costs 12 ticks × $5/tick/contract = $60/contract price-distance loss. Add $2/contract round trip. Planned amount = $62/contract.
- 3. Floor to whole contracts $300 ÷ $62 = 4.8387… contracts. Floor, do not round up: 4 contracts. Price-distance part: 4 × $60 = $240. Round-trip costs: 4 × $2 = $8.
- $300 budget: amount used + remainder
- Total used: $248. Remainder: $52. One extra contract: 5 × $62 = $310 — exceeds $300.
- Micro-sized contract Per-contract input units: Tick size: 0.25 price point/tick. Point value: $2/point/contract. Stop distance: 12 ticks = 3 points.
- 1. Convert the tick value 0.25 point/tick × $2/point/contract = $0.50/tick/contract.
- 2. Stop amount plus costs 12 ticks × $0.50/tick/contract = $6/contract price-distance loss. Add $0.80/contract round trip. Planned amount = $6.80/contract.
- 3. Floor to whole contracts $300 ÷ $6.80 = 44.1176… contracts. Floor, do not round up: 44 contracts. Price-distance part: 44 × $6 = $264. Round-trip costs: 44 × $0.80 = $35.20.
- Total used: $299.20. Remainder: $0.80. One extra contract: 45 × $6.80 = $306 — exceeds $300.
- Cost allowances apply once per contract round trip, not once per position or per side. No extra slippage is assumed. Four standard and 44 micro contracts are not equal exposures.
- Planned, not guaranteed
- Actual stop execution and losses can differ. Margin is a separate performance-bond requirement, not the stop amount or a loss cap.
- Education only. Not a trade recommendation.
Illustrative diagram constructed for teaching. Not real market data.
With the declared fictional costs included once per contract round trip, four standard-sized contracts use $248 and 44 micro-sized contracts use $299.20 of a $300 comparison amount. The different counts do not represent equal exposure. Rounding and fees explain the unused amounts.
How does that become a contract count?
How many whole contracts fit the fictional $300 planned amount?
For this teaching example only, divide the chosen amount by the planned amount per contract and round down:
Whole-contract count = floor(planned amount ÷ planned amount per contract).
| Calculation | Standard | Micro |
|---|---|---|
| Raw quotient | $300 ÷ $62 = 4.8387… | $300 ÷ $6.80 = 44.1176… |
| Whole contracts after flooring | 4 | 44 |
| Stop-distance component | 4 × $60 = $240 | 44 × $6 = $264 |
| Total round-trip cost allowance | 4 × $2 = $8 | 44 × $0.80 = $35.20 |
| Total planned amount used | $248 | $299.20 |
| Unused remainder | $52 | $0.80 |
| One additional contract | 5 × $62 = $310 | 45 × $6.80 = $306 |
The extra contract exceeds $300 in either case. Flooring is essential to this particular “do not exceed the assumed planned amount” calculation. It does not establish that any amount or count is appropriate for a person. If one contract requires $62 in this arithmetic but the chosen amount is $50, floor(50/62) = 0, not a fraction of a listed futures contract.
How do micro contracts change it?
Does one-tenth the tick value make every total cost one-tenth as large?
The fictional pair has the same tick size but different dollars per point. One standard contract has the same stop-distance dollar exposure as ten micros before costs: $60 versus 10 × $6 = $60.
The costs are not scaled one-tenth in this example. One standard’s allowance is $2, while ten micros’ allowance totals 10 × $0.80 = $8. Thus that equal pre-cost exposure uses $62 versus $68 including the assumed allowances. Smaller contract units permit finer whole-contract increments, but that does not establish lower total fees, better fills or suitability.
Notice also that 4 standard contracts and 44 micros are not equal exposures. They are two separate results of the same $300 hypothetical budget calculation with different rounding and cost effects. Check real contract specifications and broker charges rather than copying these made-up values.
What does this math leave out?
Can a planned stop amount become a larger actual loss?
Yes. The example assumes a fill at the chosen stop price. A standard stop-market order triggers a market order; the execution price can be worse, and venue-specific futures order protections/types need their own rules. Gaps, thin liquidity and additional costs can make actual losses exceed the plan. A stop-limit order instead introduces the possibility of not filling.
Fictional stress check: Four standard contracts use $248 in the table. If each exits four ticks worse than the assumed stop, the extra loss is 4 contracts × 4 ticks × $5/tick/contract = $80. With the same assumed fees, total loss becomes $328, exceeding both the $248 plan and the $300 comparison amount. This is a selected illustration, not a worst-case bound.
Margin is a separate deposit/performance-bond requirement for holding a futures position. It is not the calculated stop-distance loss and does not cap losses. Broker margin changes or liquidation can matter independently of this arithmetic.
See Risk Management Arithmetic and Overnight and Gap Risk for the existing risk and fill distinctions.
What this does not tell you about sizing
- A recommended risk amount, stop location, position size or trading decision.
- Real contract specifications, fees, margin requirements or execution prices.
- That flooring guarantees the account cannot lose more than the planned amount.
- How to size options, multiple legs, changing quantities or a portfolio.
The fee formula here is quantity × (per-contract stop amount + per-contract round-trip costs). A different method that first subtracts a fixed position-level fee must say that the fee is fixed; the two cost models are not interchangeable.
Method in Practice: the sample's sizing, step by step
Fictional example. John, Harbor Index futures, the prices, times, costs and results are all invented for teaching. This shows how a written plan can be built and tested. It is not a recommendation, and nothing here says how often this idea works.
Try it on a real chart. Test this idea yourself on past sessions with bar replay. Keep your own count, including the days with no trade.
The idea. This lesson shows the arithmetic: loss per contract, then whole contracts, rounded down. Here it is for John's plan from Volume Profile Explained: POC, Value Area, HVN, LVN, including why he uses fewer contracts than the arithmetic allows, and what the micro contract changes.
Three outcomes
-
The arithmetic: about $50 per contract, so $150 ÷ $50 = 3 contracts fit exactly
-
Why not 3: at 3 contracts, Replay B would have lost $156, more than the cap
-
John's choice: 2 contracts, which leaves room for a close-based exit past the line
Show the workings
| Step | Standard contract | Micro contract |
|---|---|---|
| 1. Expected entry | 101.50 (a close near 101.45, plus 1 tick) | Same |
| 2. Planned exit | A close just under 101.20, say 101.10, filled 1 tick worse at 101.05 | Same |
| 3. Distance | 0.45 point = 9 ticks | Same |
| 4. Loss per contract | 9 × $5 = $45, plus $5 commission = $50 | 9 × $0.50 = $4.50, plus $1 = $5.50 |
| 5. Whole contracts | $150 ÷ $50 = 3 | $150 ÷ $5.50 = 27.27, so 27 |
| 6. John's choice | 2, leaving $50 for a worse exit | (not used in the plan) |
| 7. Check against Replay B | 2 contracts: −$104 (inside). 3 contracts: 3 × −$47 − $15 = −$156 (over) |
Test it yourself
- Work out your loss per contract by hand: ticks to your exit, times tick value, plus costs.
- Round down, then ask how far past your exit a fill could go. Size for that too.
- Do the same sum with micro contracts and compare. The costs don't scale the same way (this lesson).
Where it breaks
- The planned exit price is an estimate, especially for close-based and stop exits.
- Rounding down leaves part of the cap unused, and that's fine.
- Costs and contract specifications here are fictional. Check the real ones.
Calculators: position size
Reflection question: Does your sizing allow for an exit that fills past your line?
Check yourself
- Using the same $6.80 micro amount per contract, how many whole contracts fit a separate fictional $100 amount, and what remainder is left?
- Why is the allowance for 44 micros $35.20 rather than $0.80 for the entire position?
- If a standard contract’s assumed amount is $62 and the comparison amount is $50, does rounding up to one preserve the stated calculation?
- Why can the four-standard-contract stress example lose $328 despite the $300 comparison amount?
- For a separate fictional contract with a $12.50 tick value, what is an eight-tick adverse price change worth for one contract, before fees? Is it a guaranteed stop-execution loss? Hint: ticks × tick value.
- Compare a separate fictional $100 planning amount with whole-unit amounts of $62 and $1. How much is unused, and what does this actually show about units? Hint: size of one unit.
- What does a futures performance bond secure, and why is its amount different from planned or actual loss at risk? Hint: what is margin for?
Reflect on your own process
- Where does your written plan record the tick size, tick value and fees you use, and when did you last check them against the exchange's specs?
- Does your sizing checklist say to round contract counts down, and where is that rule written?
- How does your journal record the difference between a planned stop loss and the loss you actually took?
- Does your sizing allow for an exit that fills past your line?