What it is:
How it works/Example:
Investors, particularly individuals, are frequently unable or unwilling toshares 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.the expense of trading
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.