Tick Size

Tick size is the smallest amount by which the price of a security or contract is allowed to move, up or down. You cannot get a price in between two ticks; the exchange or market simply doesn't recognize it as a valid quote.

Think of it as the grid that prices sit on. If a stock has a tick size of one cent, its price can go from $10.00 to $10.01 to $10.02, but never to $10.005. Futures and options often use different tick sizes than stocks, and the tick size can even change depending on the price level of the instrument (some markets use smaller ticks for cheaper stocks and larger ticks for higher-priced ones).

Every tick has a dollar value attached to it, and that value depends on the size of the position or contract. For a single share of stock at a one-cent tick, one tick equals one cent. For a futures contract, one tick might be worth several dollars or more, because the contract represents a larger notional amount than one share. This is why tick size and tick value are usually talked about together — the size tells you the minimum price step, the value tells you what that step is worth in dollars.

The nuance that trips people up is confusing tick size with "pip" in forex, or with the minimum order size. Tick size is purely about price increments, not about how many shares or contracts you can trade. It's also easy to assume tick size is the same across all instruments, but it varies by exchange, by product, and sometimes by price tier within the same product.