What is ‘a Lot’
The lot is a standard number of units (known as the great) asset, such as 100 shares of stock, or of any group of shares that can be evenly divided by 100, 500, 2,600 or 14,300. Lot of 100 shares has historically been the smallest order that can be placed through the exchange. Today, however, odd-lot and fractional shares allow for the execution of orders as small as one share on some exchanges or even half a share in two or three decimal places. Lot may also be referred to as a normal block.
Markets options, 100 contracts, as a rule, were on the lot in the list of calls and puts, although investors can buy only one contract of options, each of which is usually an odd lot of shares, representing 100 shares. On bond markets, a lot, usually 100,000 $of the face value of the bond. Other markets, such as commodities markets, often have their own Convention for what is defined as a large round.
Breaking Down The ‘Lot’
Investors tend to buy stocks in large quantities, which leads to the need for many measurements. There are a lot more likely to have lower trading costs; discounts are applied for different round lot amounts.
Lot consisting of less than 100 shares or lots that cannot be evenly divided by 100, is called an odd lot. Sometimes odd lots combined, or grouped, into round lots to facilitate trading. Mixed lot includes both large round and odd lot. Order 198 the stock is considered mixed. Odd lot and mixed lot trades, usually have higher trading costs but also to improve the electronic trading technology has allowed us to reduce the fee for odd lot.
In some cases, too many transactions may not be permitted or may not be a priority. Some exchanges may require only round lots on pre-defined market orders, including back orders. In these trading situations, orders are placed for auction at a specified price of the transaction, with a preference for round lots.
The recent trend has been the ability to trade in fractional shares that is less than 1.00 stock a stock or etf. Initially implemented to help with the reinvestment of dividends, many brokers now offer fractional shares as a way to promote investment in the dollar, or about to the broker that you want to buy $ 200 of stock, even if it is equivalent to say 23.87 shares.
Trades In The Bonds
In corporate bond trading, the lot is usually $100,000 bond. Trades of less than 100 000 USD or not a multiple of 100 000 $are considered odd lots and will incur higher trading costs. Trading innovation continues in the bond market and trading mechanisms, and continually evolving for the odd lot transactions and smaller blocks of bonds.
Exchanges usually have rules and regulations regarding transactions in round lots compared lots extra. Prices on these deals are mostly set on exchanges, which set prices at a brokerage firm. In addition, broker-dealers may be restricted in trading in round lot or odd lot market exchanges. Market exchanges to develop the accessibility to trade in odd lots is growing.
Lot and Odd lot transactions, it is often necessary to determine the type of demand and volatility of securities. Securities with high odd trading lot, usually accompanied by small investors, while high levels round trading lot, as a rule, testify about the safety of highly traded by institutional investors.