What Is a Handle in Futures Trading?
Understand the "handle" in futures trading. This essential guide explains its meaning, practical use, and distinction from other price increments.
Futures trading involves buying or selling a standardized asset at a predetermined price on a future date. This market uses specialized language, and understanding terms like the “handle” simplifies price communication for traders.
What a Handle Means
In futures trading, the “handle” refers to the whole number portion of a futures contract’s price, found to the left of the decimal point. This part of the price is also commonly known as the “big figure” or “big fig.” For instance, if a futures contract is quoted at $1,850.75, the handle is $1,850.
The handle serves as a quick reference point for traders. The fractional or decimal part of the price, such as the .75 in the example, is sometimes referred to as the “stem.” Traders often communicate prices efficiently by only stating the handle, assuming other market participants are aware of the stem.
Why Traders Use the Handle
Traders use the handle to streamline communication, especially in fast-paced trading environments where brevity is highly valued. It allows market participants to quickly convey and grasp significant price levels. This shorthand is particularly useful when prices are changing rapidly or reaching new milestones.
The handle also plays a role in identifying psychological price levels, which can act as significant support or resistance points. Traders often describe market movements using phrases like “breaking the handle” or “holding the handle,” indicating important shifts or consolidations. A move above or below a specific handle can signal a strong market direction, influencing decisions for trade entry or exit.
Handle Versus Other Price Increments
While the handle represents the whole dollar or integer amount, futures contracts also move in smaller increments known as “ticks” or “points.” A tick is the smallest possible price movement an instrument can make, typically found to the right of the decimal point. Each futures contract has a specific tick size and an associated monetary value.
For example, an E-Mini S&P 500 futures contract has a tick size of 0.25 points, with each tick equating to $12.50. In some index futures, a “point” can be synonymous with a “handle,” representing a full dollar increment. The handle provides the broad context of the price level, while ticks and points denote the precise, granular movements.