A:

A round lot is a predetermined number of shares of stock - usually 100 shares, while an odd lot refers to any number of shares that is not evenly divisible by 100 (usually less than 100).

Odd lots are the preferred method of purchase for many investors because it allows them to purchase smaller amounts of a particular stock. Further, they can base their purchase on a set dollar amount rather than on a specific number of shares. For example, the purchase of $165 worth of Company X would results in 27.5 shares at $6 per share.

While this method gives the investor more flexibility, it can be more expensive, primarily because of the transaction cost involved in purchasing stock. Commissions usually are charged for each transaction. Therefore, the cost per share to purchase 60 shares of a stock would be higher than the cost to purchase 100 shares, after commission fees are added in to the transaction. The amount of increased expense is dependent upon the cost per transaction of the service that the investor utilizes.

To learn more about this topic, read What's the smallest number of shares I can buy?

This question was answered by Katie Adams.

RELATED FAQS

  1. What are the requirements for being a Public Limited Company?

    Discover the various different requirements that a company must meet in order to be recognized and traded as a public limited ...
  2. How do I place an order to buy or sell shares?

    Read a brief overview of how to open a brokerage account, how to buy and sell stock, and the different kinds of trade orders ...
  3. Is there a difference between financial spread betting and arbitrage?

    Find out more about financial spread betting, arbitrage and the differences between financial spread betting and the arbitrage ...
  4. What is the difference between the return on total assets and an interest rate?

    Learn the difference between the return on total assets and an interest rate; the former is a profitability ratio, and the ...
RELATED TERMS
  1. Marginable

    Definition of "marginable."
  2. Securities-Based Lending

    The practice of making loans using securities as collateral. ...
  3. Clowngrade

    An upgrade or downgrade of a security for reasons considered ...
  4. Valium Picnic

    A market holiday or a slow trading day.
  5. Piker

    A broker or investor who makes small size trades.
  6. Blocked Period

    A period of time in which an investor’s securities are prevented ...

You May Also Like

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: Vanguard MSCI EAFE

  2. Active Trading Fundamentals

    Is there a difference between financial ...

  3. Fundamental Analysis

    What does a high turnover ratio signify ...

  4. Options & Futures

    How does a forward contract differ from ...

  5. Investing Basics

    What is the difference between passive ...

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!