Odd Lot

What It Is:

An odd lot is an order for anything less than 100 shares. This is the opposite of a "round lot," which are orders in multiples of 100 shares. However, thinly traded stocks sometimes trade in 10-share increments.

How It Works/Example:

Investors, particularly individuals, are frequently unable or unwilling to bear the expense of trading shares in even round lots. Nearly all brokers accept odd-lot trades, but some 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:

Odd-lot orders tend to be placed by small personal investors rather than institutional traders. Thus, the ratio of odd-lot buying to odd-lot selling is often used to evaluate small-investor sentiment. Trends in odd-lot short sales may also be indicative of negative sentiment by small investors.

The controversial odd-lot theory states that odd-lot traders are poor market timers and that profits can therefore be made by trading contrary to odd-lot trading patterns.