What’s an uneven lot?

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Mismatched lots are stocks sold with less than the usual number of shares. Brokers may charge different commissions for executing orders on odd lots, but they can be a good deal for investors looking to accumulate shares in highly desirable but rarely available stocks. Some brokers may advise investors when desirable lots become available.

Mismatched lots are generally considered stock lots that are sold with less than the usual number of shares included in the option. Sometimes referred to as an odd or broken lot, the odd lot may contain fewer than one hundred shares of a given stock, or fewer than ten shares of lightly traded stocks. An unequal lot does not necessarily include stock options that are less than desirable. Often times, odd or broken lots simply reflect the fact that not many shares are currently available.

It is not unusual for brokers to charge a different commission structure for executing an order on odd or broken lots on behalf of a client. This is because the commission on an uneven lot is generally less than the commission earned on a standard or round lot of shares. Since the broker will provide the same level of effort to execute the order and would earn a smaller commission with the uneven lot, most brokerage firms apply a slightly higher percentage to the commission earned on each stock traded. This slightly higher commission is typically known as the spread.

An uneven lot is often seen as a good deal for the investor. In some cases, purchasing a mismatched lot can allow an investor to begin building solid interest in a stock that is highly desirable but rarely available on the open market. Instead of waiting to acquire a round lot of these desirable shares, the investor buys an odd lot of the shares whenever it becomes available. Over time, the investor can accumulate enough shares to have a round lot within the portfolio. Once this goal is achieved, the investor can choose to sell the accumulated shares as a round lot or hold the shares if they continue to perform well and enjoy dividends.

While some brokers do not proactively notify clients of the availability of an uneven lot of stocks that may be of interest, many choose to advise investors when a desirable lot comes on the market. While the broker may earn fewer commissions even when a spread is applied, the goodwill invoked in helping a client secure the stocks they want to own is often seen as worth the time and effort.

Smart Asset.




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