What Is an Odd Lot?
When you first enter the stock market, you might hear experienced investors talk about buying "blocks" of shares. For nearly a century, the stock market has functioned on a standardized system where the primary unit of trading is 100 shares, known as a Round Lot.
An Odd Lot is simply any order that falls outside this standard. Specifically, any trade involving 1 to 99 shares is considered an odd lot.
Think of it like buying eggs at a grocery store. A "round lot" is like buying a full carton of a dozen eggs. An "odd lot" is like asking the clerk if you can buy just three individual eggs. While the market was originally built to handle full cartons, modern technology and the rise of individual retail investors in 2024 and 2025 have made these smaller "odd" orders the new standard for millions of people.
Key Takeaways
- The Definition: An odd lot is an order for 1 to 99 shares; 100 shares is a round lot.
- Modern Prevalence: In today's market, odd lots make up more than 50% of all trades due to high stock prices and algorithmic trading.
- Cost Factor: While "Odd Lot Differentials" (extra fees) were common in the past, most modern commission-free brokers have eliminated them for retail users.
- Portfolio Shifts: Corporate actions like reverse stock splits or automated dividend reinvestments often create odd lots in your account.
- Regulatory Transparency: Recent SEC rules have improved how odd lot prices are displayed, ensuring smaller investors get fairer treatment.
Comparing Units: Odd, Round, and Mixed Lots
To understand how your specific trade is handled by the exchange, it helps to distinguish between the three main types of "lots" you might encounter. The following illustration provides a clear visual comparison.
- Round Lot: The benchmark of 100 shares. This is the unit used to set the "bid" and "ask" prices you see on major financial news tickers.
- Odd Lot: 1 to 99 shares. These are smaller orders often placed by retail investors who are just starting or have a specific budget.
- Mixed Lot: This occurs when an order is greater than 100 shares but is not a multiple of 100.
Example: Suppose you want to invest in a major tech company. If you buy 100 shares, you have a Round Lot. If you only buy 15 shares, you have an Odd Lot. If you decide to buy 150 shares, you have a Mixed Lot (one round lot of 100 plus an odd lot of 50).
Why Odd Lots Are the New Normal Now
You might wonder why we still use the 100-share rule if the market has become so digital. The answer lies in the history of the exchanges, but the reality on the ground is shifting rapidly. The image below illustrates the three key forces that have made odd lots the new standard.
As of 2025, odd lots are no longer the exception—they are the rule. There are several reasons for this "new normal":
- High Share Prices: Many top-tier stocks now trade at hundreds or even thousands of dollars per share. Buying a round lot of a $500 stock would cost $50,000, which is out of reach for many. Buying 1 or 5 shares (an odd lot) is the only practical way for many to participate.
- Fractional and Algorithmic Trading: Professional trading algorithms often "shred" large orders into tiny odd lots to hide their intentions from the market and find better prices.
- Retail Accessibility: Most modern brokerage apps encourage smaller, more frequent investments.
According to research from major exchanges like the Nasdaq and Cboe, odd-lot trades now frequently account for over half of all daily trading volume in the U.S. stock market.
How Your Portfolio Ends Up with Odd Lots
While you might choose to buy an odd lot because of your budget, there are times when your account will end up with "odd" numbers of shares through no direct action of your own. The following infographic demonstrates the three most common scenarios.
The Impact of Corporate Actions
Sometimes, a company decides to change its share structure. If a company's stock price falls too low, they might perform a Reverse Stock Split. If you owned 100 shares (a round lot) and the company did a 1-for-10 reverse split, you would suddenly own only 10 shares—effectively turning your position into an odd lot.
Automatic Wealth Building
If you have enabled Dividend Reinvestment Plans (DRIPs), your cash dividends are automatically used to buy more stock. Since dividends are usually small, they might only buy 2.5 or 12 shares at a time. Over time, this natural growth creates a portfolio filled with odd and fractional lots.
The Financial Impact: Execution and the Odd Lot Differential
In the decades before electronic trading, brokers often charged a small fee called an Odd Lot Differential. This was a markup intended to compensate the "odd-lot dealer" for the extra work of breaking up a 100-share block to give you your small order.
If the market price of a stock was $20.00, a round-lot buyer paid $20.00, but an odd-lot buyer might have paid $20.12. Today, for most retail investors using major platforms, this differential has virtually disappeared. However, there is still a slight "execution risk." Because odd lots are smaller, they might not be executed as quickly as a standard 100-share block during times of extreme market volatility.
Modern Regulation: How the SEC Protects You
The Securities and Exchange Commission (SEC) has recognized that the rise of odd-lot trading requires better protection for small investors.
Historically, odd-lot trades were "invisible" on the consolidated tape—the official public feed of stock prices. This meant that the price you saw on your screen might not have included the activity of millions of small traders. Under SEC Regulation NMS (National Market System), specifically the Market Data Infrastructure Rule, there has been a significant push to include odd-lot quotes in the public data. This ensures that even if you are only buying 5 shares, you are seeing a price that reflects the true, real-time activity of the entire market.
Conclusion: Navigating the Market as a Small-Scale Investor
For a beginner in today’s market, the term "odd lot" is a technicality rather than a barrier. It is simply a way to describe how you are building your portfolio—one step (or one share) at a time.
While the 100-share round lot still acts as the "official" unit for big institutions and regulators, the power has shifted toward the individual. By understanding these units, you can trade with the confidence that whether you own 1 share or 1,000, you are participating in a system that is increasingly designed to accommodate investors of all sizes.
Sources
- U.S. Securities and Exchange Commission (SEC) - Regulation NMS Final Rule regarding the National Market System and market data modernization
- Investopedia - Odd Lot: Definition, Examples, Vs. Round Lot Comprehensive financial education guide for retail traders
- Nasdaq - Odd Facts About Odd Lots April 22, 2021, analysis of the growth and impact of small trades on market volume
- Cboe Global Markets - An In-Depth View into Odd Lots October 20, 2020, research into execution quality and price discovery in modern markets
- New York Institute of Finance (NYIF) - Fast Finance: Odd Lot Differential Explained Professional training overview of historical transaction cost mechanics
- Wealthsimple - What are odd lots? Help Center documentation for retail investors regarding trade units