Round Lot
Candlefocus EditorIn the stock market, a round lot is generally defined as 100 shares or a multiple of 100. Other sizes of lots are referred to as ‘Odd Lots’ and are usually any amount lower than 100 shares of a particular stock or index. The liquidity of a particular stock and the amount of trading volume can determine what types of lots are acceptable for trading.
In the bond market, a round lot is defined as $100,000 worth of bonds or a multiple thereof. As with stocks, smaller trading sizes, such as $50,000 or $25,000, are also accepted but may be subject to less liquidity than a round lot.
Traders often use round lots when conducting longer-term investments or trading. This is to minimize costs associated with trading fees and slippage. Longer-term investors often opt for a round lot to get the benefits of better prices due to higher liquidity.
However, with technological advances in the financial industry, odd lots and smaller lots have become more popular. This can particularly be seen with retail investors who value the convenience of online trading, low commission costs and the ability to break down large round lots into smaller portions.
In summation, round lots are the standard trading size used for stock and bond trading. While round lots remain the most popular for larger trades due to their liquidity, odd lots and smaller lots have become increasingly popular with retail investors to buy or sell larger positions. Therefore, the type of lot used for trading will depend on the amount of capital available, the level of liquidity and the degree of risk you are willing to accept.