Definition
The term odd lot refers to an order that is not a multiple of the normal unit of trading for that security. An odd lot for common stock is any order that is not a multiple of 100 shares.
Explanation
Since the standard unit of stocks is 100 shares, any order for 1 to 99 shares is considered an odd lot. Broker commissions for trades are typically stated in terms of a standard trading unit for a security. In the case of stocks, the fee charged by brokers to execute a trade would normally be stated as a minimum fixed amount for a standard trading unit. In the past, traders would try to avoid placing orders for odd lots, since the relatively high commission would erode their return on investment.
Odd lots are treated differently by stock exchanges too. For example, these orders do not affect the displayed bid / ask prices, nor are they posted to tickers. Since the trade isn't in a standard unit, execution of the transaction can also be delayed.
Over the years, competition for customers has lowered broker commissions, and placing an odd lot order is less of a concern.
Related Terms
scale orders, round lot orders, Order Protection Rule, buy minus orders, sell plus orders
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