What Is a Round Lot?
A round lot refers to a standard trading order of securities. Round lots can consist of 100 or any multiple of 100 units of securities. Lots are traded on exchanges and are made up of any type of security, including stocks and bonds. In stocks, a round lot is considered 100 shares or a larger number that can be evenly divided by 100. In bonds, a round lot is usually $100,000 worth. A round lot is often referred to as a normal trading unit and is contrasted with an odd lot.
Key Takeaways
- A round lot is a standard minimum trading size for a security or asset.
- A round lot of stocks usually equals 100 shares or a multiple of 100 shares.
- With bonds, a round lot represents $100,000 worth or multiples of $100,000.
- Odd lots and smaller lots are increasingly common due to technological advances and retail investor demand.
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 Lots
- Stocks: As noted above, a round lot of stocks is typically comprised of 100 shares. In other cases, it can be a multiple of 100. Since ETFs trade just like stocks, they also fall in this category.
- Bonds: A round lot in bonds is usually $100,000 worth of bonds or a multiple of $100,000. Any other amount is considered an odd lot and incurs higher trading costs. That said, innovation is ongoing in the bond market, too, and mechanisms are evolving for smaller blocks and odd-lot trades.
- Options: In the options markets, a round lot consists of 100 contracts in listed calls and puts. Investors can buy one options contract. Each of those contracts typically represents an odd lot of stock. Other markets, such as commodities markets, have their convention for what is defined as a round lot.
- Futures: In the futures market, contract sizes are called lots. The contract or lot size depends on the nature of the underlying asset being traded, such as a commodity, currency, or interest rate. For instance, the lot size of a futures contract for wheat is 5,000 bushels.
- Foreign Exchange: Lot sizes vary in the forex market. A standard lot is comprised of 100,000 units of the base currency. There are also micro and mini lots, which hold 1,000 and 10,000 units of the base currency.
Round lots are generally executed quicker, although trading in odd lots is becoming easier and less costly.
Round Lots vs. Odd and Mixed Lots
A 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 helpedreduce 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.
What Is a Round Lot Holder?
A round lot holder is a party who owns a round lot of unrestricted shares. A round lot is made up of 100 shares or a multiple of 100 shares. Unrestricted shares are those that do not required any conditions to be filled before they can be transferred or sold.
What Is a Board Lot?
The term board lot refers to the standard number of units of shares set by an exchange as a single trading unit. For most exchanges, this is generally the same as a round lot, which represents 100 shares or a multiple of 100 shares. Keep in mind, though, that the size of a board lot may change based on the exchange, so it may be higher in some cases. For instance, Japanese exchanges have board lot sizes of 1,000 shares.
Are Round Lots More Common Than Odd Lots?
Round lots are among the most common large trading orders as they incur the lowest trading fees. But odd lots are becoming more common among traders and brokers. That's because automated and electronic trading makes it easier to execute these trades at lower costs.
The Bottom Line
A lot is the total number of units of a financial instrument that is bought and sold on an exchange. Lots can be mixed, odd, or round. The size of a round lot is determined by the exchange. In most cases, it is made up of 100 shares of a financial security, such as a stock or bond. It may also be a multiple of 100. Trading round lots helps improve market efficiency and, because it's a bulk order, also provides traders with lower trading costs.
FAQs
The size of a round lot is determined by the exchange. In most cases, it is made up of 100 shares of a financial security, such as a stock or bond. It may also be a multiple of 100. Trading round lots helps improve market efficiency and, because it's a bulk order, also provides traders with lower trading costs.
What is a lot and how does it work? ›
A lot is the standardised number of units of an asset being traded. Often, the actual value of an asset or security means that trading just a single unit isn't viable. In these cases, traders will use a lot: a set amount of a particular asset that you buy or sell in each transaction.
What is the round lot requirement? ›
A round lot (or board lot) is a normal unit of trading of a security, which is usually 100 shares of stock in US. Each stock exchange has its own regulations regarding round lot sizes: they can range anywhere from 1-100 shares, depending on the exchange.
Is a multiple of 100 shares stocks are usually bought and sold in round lots? ›
Stocks are traded in round lots or odd lots. A round lot is 100 shares or multiples of 100 shares of a particular stock. An odd lot is fewer than 100 shares of a particular stock.
What is the difference between odd lots and round lots? ›
While odd lots can include any number of shares between one and 100, a round lot is any lot of shares that can be evenly divided by 100. 2 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.
What is IoT in simple words? ›
The term IoT, or Internet of Things, refers to the collective network of connected devices and the technology that facilitates communication between devices and the cloud, as well as between the devices themselves.
How much is a round lot? ›
A round lot is 100 shares in the stock market but investors don't have to buy round lots. A lot can be any number of shares. An odd lot is the term used when fewer than 100 shares are bought.
What is the difference between a board lot and a round lot? ›
A board lot is a standardized number of shares defined by a stock exchange as a trading unit. In most cases, this means 100 shares. A board lot is what the exchange determines to be a round lot. The purpose of a board lot is to minimize trading "odd lots" and to facilitate easier trading.
What is a round lot sale? ›
A round lot is the standard trading unit for a security or asset. The round lot size denotes the number of shares that represent a round lot for the issue. 100 shares of a security is typically referred to as a round lot, however, there are cases in which securities trade in round lots of 10 or even 1.
How much stock is in a round lot? ›
A round lot is a standard minimum trading size for a security or asset. A round lot of stocks usually equals 100 shares or a multiple of 100 shares. With bonds, a round lot represents $100,000 worth or multiples of $100,000.
Examples of lots
For example, the standard lot size for the stock market is 100 shares – it is the number of shares that are bought and sold in a normal transaction. This is also known as a 'round lot'. Exchange traded funds (ETFs) are priced in the same way, so that one lot is equal to 100 shares.
How many shares make one lot? ›
For example, the standard lot size for the stock market is 100 shares – it is the number of shares that are bought and sold in a normal transaction. This is also known as a 'round lot'. Exchange traded funds (ETFs) are priced in the same way, so that one lot is equal to 100 shares.
What is 100 shares of stock called? ›
Stocks are most commonly sold in round lots, or lots of 100 shares or more. A lot of less than 100 shares is called an odd lot; odd lot transactions generally have greater commission costs associated with them. Financial professionals advise having enough money to buy a round lot of shares in one company.
Are odd lot purchases bullish or bearish? ›
When the majority of investors are buying odd lots, it suggests a bullish sentiment, as small investors tend to be more optimistic about the stock's future performance. Conversely, when odd lot selling dominates, it indicates a bearish sentiment, as small investors may be taking profits or cutting their losses.
What do the terms round lot and odd lot mean in stock transactions? ›
An odd lot refers to an amount that's less than the typical number of shares or units you'd trade for an asset. In stock trading, an odd lot would describe any amount less than 100 shares of a stock, which is considered a standard – or "round" – trading unit. This number can vary from one exchange to another, however.
What is a lot used for? ›
A lot is used as a pronoun meaning “many” or “a great amount” and an adverb meaning “very much” or “often.” Allot is a verb meaning “assign” or “distribute.” Alot is sometimes mistakenly used instead of a lot. However, it isn't a real word and should be avoided.
What is considered a lot? ›
The definition of a lot is “a large quantity of something” or “very much.” Having not one, not two, but a lot of apples in your grocery basket will evoke a picture of an abundance of fruit, such as 10 or 20 apples.
What is the difference between a lot and a property? ›
Similarly, raw land is any property that is uninhabited and is not yet ready for building. A lot, on the other hand, is a piece of property that is currently ready for building a structure. In most cases, this means that it is already set up for utilities like electricity, telephone lines, gas, water, sewer, etc.
What is IoT with an example? ›
The internet of things is a technology that allows us to add a device to an inert object (for example: vehicles, plant electronic systems, roofs, lighting, etc.) that can measure environmental parameters, generate associated data and transmit them through a communications network.
