Minimum Price Fluctuation (Tick)

Learn about minimum price fluctuations (ticks) in futures contracts, how tick sizes vary by instrument, and their impact on market liquidity.

Key Takeaways

Tick sizes differ by futures contract and are exchange-defined.
Tick value depends on contract size and tick increment.
Proper tick sizing helps maintain market liquidity and tight spreads.
Understanding tick values is essential for futures trading strategies.

What the video covers

All futures contracts have a minimum price fluctuation called a tick.
Tick sizes are set by the exchange and vary depending on the contract instrument.
The E-mini S&P 500 futures contract tick size is one quarter of an index point.
An index point for the E-mini S&P 500 is valued at $50, making one tick worth $12.50.
The NYMEX WTI crude oil contract has a tick size of 1 cent with a contract size of 1,000 barrels, so one tick equals $10.
Tick sizes vary based on the size of the financial instrument and marketplace requirements.
Exchanges set tick sizes to optimize liquidity and maintain tight bid-ask spreads.
Minimum price fluctuation details for any CME Group contract can be found on the product specifications page.

Chapters

What is a tick in futures trading?

A tick is the minimum price fluctuation allowed for a futures contract, set by the exchange.

How is the tick value calculated for the E-mini S&P 500 futures contract?

The tick size is one quarter of an index point, and since one index point equals $50, one tick is worth $12.50.

Why do tick sizes vary between different futures contracts?

Tick sizes vary based on the size of the financial instrument and marketplace requirements to optimize liquidity and maintain tight bid-ask spreads.