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's the smallest number of shares I can buy?

    Unlike mutual funds, which can be purchased in fractional units, shares of stock cannot be divided. So, the smallest number ... Read Answer >>
  2. What is the cost of a share purchase?

    Find out how the total price of a share purchase is dictated by the current stock price and the fees the brokerage company ... Read Answer >>
  3. What is the smallest amount of shares I can buy?

    Understand the steps needed for an investor to open a brokerage account and make a trade. Learn what the smallest amount ... Read Answer >>
  4. What's the smallest number of shares of stock that I can buy?

    The answer to this question is not as straightforward as it seems. Many people would say that the smallest number of shares ... Read Answer >>
Related Articles
  1. Trading

    The Odd Lot Theory: Betting That Small Investors Are Wrong

    The odd lot theory is a largely discredited proposition that small investors are usually wrong and that doing the exact opposite will yield above-average returns.
  2. Investing

    What is a Lot?

    The term “lot” refers to any group of goods or services that make up a transaction.
  3. Investing

    Don't Lose Your Shirt On Mutual Fund Sales

    Mutual funds aren't guaranteed profit-makers, but with the right calculations and timing, you can avoid major losses.
  4. Trading

    NYIF Instructor Series: Odd Lot Orders

    In this short instructional video Jack Farmer explains what an odd lot order is and what the potential downsides are.
  5. Managing Wealth

    What Determines Your Cost Basis?

    In any transaction between a buyer and seller, the initial price paid in an exchange for a product or service will qualify as the cost basis. When it comes to securities and related financial ...
  6. Investing

    What Are Transaction Costs?

    Transaction costs are expenses incurred from buying or selling securities.
  7. Investing

    The Basics Of Outstanding Shares And The Float

    We go over different types of shares and what investors need to know about them.
  8. Managing Wealth

    Know Your Stock Cost Basis

    Understanding equity cost basis is critical for tracking the gains or losses of an investment.
  9. Managing Wealth

    What are Ordinary Shares?

    Ordinary shares are any type of shares that are not preferred and don’t pay any type of predetermined dividend amount.
  10. Investing

    What are Issued Shares?

    Issued shares are the amount of authorized stocks a company’s shareholders buy and own. The annual report shows the number of outstanding shares.
RELATED TERMS
  1. Odd Lot

    An order amount for a security that is less than the normal unit ...
  2. Even Lot

    A normal unit of trading for securities or bonds. An even lot ...
  3. Round Lot

    A group of 100 shares of a stock, or any group of shares that ...
  4. Mixed Lot

    A type of order for a number of securities that is not a round ...
  5. Board Lot

    A standardized number of shares defined by a stock exchange as ...
  6. Odd Lotter

    An individual investor who buys securities, usually stocks, in ...
Hot Definitions
  1. Money Market

    A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. ...
  2. Block (Bitcoin Block)

    Blocks are files where data pertaining to the Bitcoin network is permanently recorded.
  3. Fintech

    Fintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century.
  4. Ex-Dividend

    A classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be ...
  5. Debt Security

    Any debt instrument that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount ...
  6. Taxable Income

    Taxable income is described as gross income or adjusted gross income minus any deductions, exemptions or other adjustments ...
Trading Center