how round lots work
in trading a lot is a fixed number of units of a financial asset traded on an exchange lots can be bought or sold as noted above they can include any type of financial instrument including stocks and exchange traded funds etfs bonds options futures and foreign exchange among others investment managers and institutions typically purchase stocks in large batches round lots often have lower trading costs than other orders and discounts are applied for various round lot amounts round lots help simplify the trading process and increase market efficiency historically a round lot of 100 shares of stock has been the smallest order that can be placed through an exchange however that is changing today so called odd lots and fractional shares allow for the execution of orders as small as one share on some exchanges or even a fraction of a share types of round lotsround lots are generally executed quicker although trading in odd lots is becoming easier and less costly round lots vs odd and mixed lotsa lot consisting of fewer than 100 shares or a lot that cannot be evenly divided by 100 is called an odd lot odd lots may be combined or bunched into round lots to facilitate trading a mixed lot consists of both a round lot and an odd lot an order of 198 shares would be considered a mixed lot odd lots are increasingly common but they generally incur higher costs improved electronic trading technologies helped reduce any additional fees nevertheless odd lot trades may not be allowed or given priority some exchanges may require only round lots for pre specified market orders including reserve orders these orders are placed for trades at a specified transaction price and preference is given for round lots even fractional shares can now be traded this type of trading originally allowed for dividend reinvestment many brokerages now use it to allow their customers to use a dollar cost investing strategy the customer sets a personal goal of investing a set amount of money say 200 every month in a particular stock or fund regardless of its price swings 