What it is:
How it works (Example):
Lots are the standard trading amount, and thus they usually incur the most favorable commission costs. For example, if you wanted to buy six lots of Company XYZ stock, you would be buying 600 shares.
Investors, especially individuals, frequently cannot or do not want to bear the expense of trading shares in round lots, however, which is why most brokers also accept “odd-lot” trades (though they may charge a higher commission for doing so). However, the advent of electronic and online trading platforms has reduced, and in some cases eliminated, these odd-lot premiums.
Why it Matters:
Lot investors tend to be larger investors. The ratio of odd-lot buying to odd-lot selling, on the other hand, is often used to evaluate small-investor sentiment.
What is a ‘Standard Lot’
A standard lot is the equivalent to 100,000 units of the base currency in a forex trade. A standard lot is similar to trade size. It is one of the three commonly known lot sizes; the other two are mini-lot and micro-lot.
BREAKING DOWN ‘Standard Lot’
A standard lot represents 100,000 units of any currency, whereas a mini-lot represents 10,000 and a micro-lot represents 1,000 units of any currency. A one-pip movement for a standard lot corresponds with a $10 change. For example, if you buy $100,000 against the Japanese yen at a rate of ¥110.00 and the exchange rate moves to ¥110.50, which is a 50 pip movement, you have made $500. Conversely, if the exchange rate falls 50 pips to ¥109.50 your net profit and loss is minus $500.
With the advent of online brokers and increased competition it is possible for retail investors to make trades in amounts that aren’t a standard lot, mini-lot, or micro-lot.
In the interbank market where banks trades with each other on platforms such as Reuters and EBS, the standard trading size, or standard lot, is 1 million units in the base currency.
An odd lot is an order amount for a security that is less than the normal unit of trading for that particular asset. Odd lots are considered to be anything less than the standard 100 shares for stocks. Trading commissions for odd lots are generally higher on a percentage basis than those for standard lots, since most brokerage firms have a fixed minimum commission level for undertaking such transactions.
BREAKING DOWN ‘Odd Lot’
Odd lots may inadvertently arise in an investor’s portfolio through reverse splits or dividend reinvestment plans. For example, a one-for-eight reverse split of a security, of which the investor holds 200 shares, will result in a post-split amount of 25 shares. While trading commissions for odd lots may still be higher than for standard lots on a percentage basis, the popularity of online trading platforms and the consequent plunge in brokerage commissions means that it is no longer as difficult or expensive for investors to dispose of odd lots as it used to be in the past.
Odd Lots, Round Lots and Mixed Lots
While odd lots can include any number of shares between one and 100, a round lot is any lot of shares that can be evenly divided by 100. For example, 75 shares would be an odd lot since it is below 100 shares, while 300 shares would be a round lot since it can be evenly divided by 100.
A normal unit of trading for securities or bonds. An even lot purchase of stock is 100 shares, while an even lot purchase for bonds is five shares. A stock transaction that involves less than 100 shares is considered an odd lot and may incur higher trading fees on a fee-per-share basis.
BREAKING DOWN ‘Even Lot’
Investors may realize cost savings the more shares that they purchase. Institutional investors, for example, trade in much larger lots and can spread costs over more shares. Trading in large even lots results in enhanced market liquidity and minimizes the impact of trading spreads.
Also referred to as round lots or full lots.