Odd Lot
In finance, an “odd lot” is a term used to describe a number of shares that are less than the standard trading unit, which is often referred to as a “round lot.”
In the U.S. stock market, a round lot is typically 100 shares. So, if an investor purchases fewer than 100 shares of a company’s stock, or any number of shares that is not a multiple of 100, that investment is considered an odd lot.
For example, if you buy 45 shares of a company’s stock, that would be considered an odd lot. Similarly, if you purchase 150 shares, the transaction consists of one round lot (100 shares) and one odd lot (50 shares).
Odd lots can be more difficult to sell than round lots, and they can sometimes be sold at slightly worse prices because they are less liquid and harder for market makers to handle. However, with the rise of retail investing and brokerages offering no-fee trades, the distinction between odd lots and round lots has become less important for many investors.
Example of an Odd Lot
Suppose you want to invest in a fictional technology company called “TechNova Inc.” and the current share price is $50.
- If you decide to buy 100 shares of TechNova Inc., you are purchasing one round lot. Your total investment would be $5,000 (100 shares x $50/share).
- If you decide to buy 50 shares of TechNova Inc., you are purchasing an odd lot. Your total investment would be $2,500 (50 shares x $50/share).
- If you decide to buy 250 shares of TechNova Inc., your purchase consists of two round lots (200 shares) and one odd lot (50 shares). Your total investment would be $12,500 (250 shares x $50/share).
Remember, historically, trading in odd lots could sometimes be more expensive or less efficient due to their lower liquidity and the extra work brokers had to do to match them. However, with the advent of online trading and zero-commission brokers, this is becoming less of an issue for individual investors.
