The math behind position sizing does not change as capital grows. The same risk amount, divided by the same per unit risk, gives the same share quantity. What larger capital makes clear is a further constraint. A futures or options position can only be built in whole lots. The risk based quantity a bigger capital produces is not a lot multiple.
Definition and Formula
The base rule is the one this site’s position size calculator runs. A risk amount is set as a % of capital. A per unit risk is taken as the distance between the two prices supplied. The risk amount divided by the per unit risk gives a quantity, rounded down.
Shares can be held in any whole number. Futures and options contracts cannot. Each stock and index has a lot size fixed by the exchange. A position in that contract can only be built in whole multiples of it.
The share quantity that the risk rule produces seldom lands on a lot multiple. The two numbers come from unlinked sources. One comes from a chosen risk % and two prices. The other comes from an exchange contract spec. When they do not match, two whole lot quantities sit nearest the risk based figure. One sits below it, and one sits above.
Holding the lower of the two keeps the actual risk taken below the stated limit. Holding the higher one places the actual risk above that limit. There is no third whole lot quantity that sits right on the stated limit unless the numbers happen to come out even.
Growing the capital figure does not close this gap. The lot size stays fixed. So the distance between one lot multiple and the next stays fixed too. A larger position is simply more apt to fall between two multiples.
The lot size itself is set by the exchange. It differs from one stock or index to another. It is published on this site’s own lot size reference page. Nothing about a larger capital figure changes what that reference states.
Formula: Risk amount = capital times risk% divided by 100. Per unit risk = the entry minus the stop. Share quantity = FLOOR(risk amount divided by per unit risk). Lots = FLOOR(share quantity divided by lot size).
A Worked Example
| Capital (₹) | 50,00,000.00 |
|---|---|
| Risk limit (%) | 1% |
| Entry (₹) | 2,850.00 |
| Stop (₹) | 2,790.00 |
| Lot size (shares) | 500 |
| Risk amount (₹) | 50,000.00 |
|---|---|
| Share quantity (risk-based) | 833 |
| Nearest whole lots | 1 |
| Rounded down — shares | 500 |
| Rounded down — actual risk (₹) | 30,000.00 |
| Rounded up — shares | 1000 |
| Rounded up — actual risk (₹) | 60,000.00 |
The risk amount and share quantity come from the same position size engine as the risk : reward page. The lot size is this site’s own F&O lot size reference. The two rounded rows are the whole lot quantities nearest that share quantity.
What This Number Tells You
The rounded down and rounded up rows state the two whole lot quantities nearest the risk based share quantity. They also state what each does to the risk really taken.
Rounding down states a quantity whose actual risk sits below the stated limit. Rounding up states one whose actual risk sits above it. Once a market trades in lots, there is no third option.
And What It Does Not Tell You
It does not state which of the two lot quantities to hold. That choice is not something this page works out.
It says nothing about whether the risk % or the capital figure used is right. Both are supplied by the reader, and this page puts forward no value for either.
Lot sizes are set by the exchange and can change. The figure used here is a stated case, not a live reading. This site’s own lot size reference should be checked for the current one.
Frequently Asked Questions
Why does the risk based quantity land between two lot multiples?
Because the risk based share quantity comes from a chosen risk % and two prices. The lot size comes from an exchange contract spec. The two numbers have no reason to come out even.
What happens if the quantity is rounded up to the next lot?
The position becomes larger than the stated risk limit allows. The actual risk at that quantity is printed alongside it, so the size of the excess is stated rather than hidden.
Does the lot size change as capital grows?
No. The lot size is fixed by the exchange for a given contract. It does not depend on the capital or the risk % entered.
Is the rounded down quantity always the better choice?
This page does not say. It states what each of the two whole lot quantities does to the risk figure. Choosing between them is not a math question.
Where does the lot size figure come from?
From this site’s own F&O lot size reference, refreshed from the exchange contract file rather than typed in by hand.