What is a Round Lot?
A round lot is a securities trade for 100 trading units. In stock trading, a round lot is 100 shares. However, inactive stocks generally trade in 10-share lots.
How Does a Round Lot Work?
Round lots are the standard trading amount, and thus they usually incur the most favorable commission costs. For example, if you wanted to buy six round lots of Company XYZ stock, you would be buying 600 shares.
Investors, especially individuals, frequently cannot or do not want to bear the expense of trading shares in round lots, however, which is why most brokers also accept “odd-lot” trades (though they 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.
Why Does a Round Lot Matter?
Round lot investors tend to be larger investors. The ratio of odd-lot buying to odd-lot selling, on the other hand, is often used to evaluate small-investor sentiment.
