# Understanding Odd Lots: Their Role in Trading and How They Occur

## What Is an Odd Lot?

An odd lot is a securities order with fewer shares than the standard trading unit, usually under 100 in stock transactions. Odd lots can result from reverse splits or dividend reinvestment plans. Unlike round lots, odd lots suffer from higher trading commissions, making transactions costlier and sometimes slower. This article explores odd lots, their formation, and their impact on trading activity.

### Key Takeaways

*   An odd lot in trading involves purchasing fewer shares than a round lot, typically less than 100 shares.  
    
*   Odd lots often have higher trading commissions due to fixed minimum fees set by brokerage firms.  
    
*   They can arise from corporate actions like reverse stock splits or dividend reinvestment plans.  
    
*   Unlike round lots, odd lot transactions are not visible on bid/ask data and can take longer to execute.  
    
*   Companies may address odd lots by buying them out or converting them into round lots.

## How Odd Lots Develop in Trading

Odd lots can appear in a portfolio due to [reverse splits](https://www.investopedia.com/terms/r/reversesplit.asp) or [dividend reinvestment plans](https://www.investopedia.com/terms/d/dividendreinvestmentplan.asp). For instance, if an investor holds 200 shares and a one-for-eight reverse split occurs, they will have 25 shares afterward. Although odd lot commissions can still be high, online trading platforms have made it easier and cheaper for investors to sell them.

## Differences Between Odd Lots, Round Lots, and Mixed Lots

While odd lots can include any number of shares between one and 100, a [round lot](https://www.investopedia.com/terms/r/roundlot.asp) 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 counted as a round lot since it can be evenly divided by 100.

While round lots are posted on the associated exchange, odd lots are not posted as part of the bid/ask data. Further, the execution of odd-lot trades does not display on various data reporting sources. Due to the uncommon number of shares involved in the trade, odd-lot transactions often take longer to complete than those associated with round lots.

[Mixed lots](https://www.investopedia.com/terms/m/mixedlot.asp) include lots with over 100 shares, but that cannot be evenly divided by 100. For example, 147 or 2,999 would both be mixed lots. Reporting on mixed lots, including bid/ask data, generally only displays the portion that constitutes a round lot. For example, using the aforementioned mixed-lot sizes, the 147 shares would report as 100, and the 2,999 shares would report as 2,900.

## How Companies Manage Odd Lots

Since an odd lot is considered fairly insignificant to larger institutions, a company may choose to eliminate any odd holdings from the marketplace. This can include [buying out the associated shareholder](https://www.investopedia.com/ask/answers/08/odd-lot-buyback.asp) at a premium, offering additional shares to the shareholder to create a round lot, or engaging in a reverse split designed to result in the odd lot becoming equivalent to less than one share to pay the investor cash for a residual holding.

## The Bottom Line

An odd lot in trading refers to an order quantity of less than the standard trading unit, typically under 100 shares for stocks. While odd lots incur higher commissions and take longer to execute due to their non-standard sizes, the rise of online trading platforms has eased the process of handling them. Odd lots commonly arise from corporate actions like reverse stock splits or dividend reinvestment plans. Companies may address odd lots by offering additional shares or buyouts to streamline their shareholder base. Investors should be mindful of odd lots' implications on trading costs and execution speed to make informed financial decisions.  

> **Article Sources**
>
> 1.  Nasdaq. “[5000\. Nasdaq Listing Rules](https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-5000-series).”
>     
> 2.  Interactive Brokers. “[What Is an ‘Odd Lot’ in Stocks?](https://www.ibkrguides.com/kb/article-1062.htm)”