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Do You Buy Even Lots?
Old 01-07-2019, 10:30 AM   #1
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Do You Buy Even Lots?

Usually I'll have $X to invest, and I'd kind of like to invest it all, which would mean buying some odd lot plus factional shares. I don't even think it's possible to buy fractional shares*, but my question is "do you (try to) go for an even lot (multiple of 100) if you can?" Perhaps higher priced issues, you'd go for multiple of 50 or even 10. But do you bother? If so, why? It seems in the old days your trade would be easier to match, when matching was done by a person. So in the old days those trades went through faster and also (I think) might have had a less expensive commission price. I didn't trade back in those days, but I do recall hearing "odd lots", and that was associated with inefficiency and higher cost.


But now, with computers doing the matching, is there really any difference? Will I get the same price for my trade? Should I just buy 513 shares and not 500? It's going to have the "dividend reinvestment" checkbox, so the nice, even 500 is going to get messed-up as soon as I get the first dividend anyway.




* except your brokerage house might help you out in that regard if you sign-up for dividend reinvestment.
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Old 01-07-2019, 10:52 AM   #2
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My Dad used to buy stocks way back then, and my understanding from him is that the commission was lower for "round lots" of 100 shares or multiples thereof, which was his main motivation for trying to buy round lots.

That is also why stocks used to split their shares more often. If the price per share got too high, it reduced the number of people who could afford a round lot, and made that stock less attractive and harder to trade.

Now, as you point out, I don't think it makes any difference.
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Old 01-07-2019, 10:55 AM   #3
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In the old days there was a 1/4 point differential for under 100 share orders. These days it makes no difference. Shares only trade in whole shares. Today some brokers will hold a fraction on your behalf.
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Old 01-07-2019, 11:46 AM   #4
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I think lot size is relevant to option traders.
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Old 01-07-2019, 01:55 PM   #5
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There are some interesting differences still between odd lots and round lots that might be meaningful to some people.

An interesting discussion took place at bogleheads on trade executions and buried in that multi-page thread is some meat:
https://www.bogleheads.org/forum/viewtopic.php?t=165732

I think that odd lots may be internalized by the broker and often get a better execution than round lots. The reason is that there is a law that says that a trade cannot take place at worse-than-published price or something like that. So often odd lots get "price improvement."

But larger order like a 2000 share order are gonna be different than a 2011 share order, so if you have free trades it might be better to submit a 1600 share order and a 411 share order or a 2000 share order and an 11 share order. That is, do the experiment and watch real-time level 2 quotes and the order book (see the linked thread).

If you don't have real-time level 2 quotes, then it probably doesn't matter what you do as you won't notice whether you got price improvement or not.
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Old 01-07-2019, 01:59 PM   #6
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I will often submit an order for something like 233 shares, and end up with a result like:

200 shares @ 20.00
33 shares @ 20.01

Interestingly, I have seen it be both in my favor and not in my favor for the odd lot portion.

I think for small illiquid stocks, it's better to use lots of 100 if possible, because it's already hard enough finding a market for them. But I don't really let it stop me if for whatever reason an even lot doesn't align well with the amount I want to spend.
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Old 01-07-2019, 02:00 PM   #7
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And conversely, I submit orders for 2000 shares and see them go through as a series of odd lot transactions.
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Old 01-07-2019, 02:12 PM   #8
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I'm using a Robinhood account, mostly for play and testing out some trading ideas.

In the two months I've had the account, I have never placed a trade for more than 25 shares. Most of my trades are under 10 shares, and I will routinely buy or sell 1 to 5 shares in a transaction.

When you have unlimited no commission trades, the mindset becomes slightly different. I know I am getting good executions, because I can watch my trades through Fidelity's Active Trader platform and see them execute.
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Old 01-07-2019, 02:37 PM   #9
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I always buy even lots, force of habit from decades ago when I started when trading odd lots came with a surcharge. Selling's another matter, especially tax loss harvesting, because many of my losers come with reverse splits that create odd lots...

Another ingrained habit is using AON (all or none) where possible. I did this to simplify records, but with broker aggregation on 8949 boxes A and D it may not matter any more.
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Old 01-07-2019, 02:38 PM   #10
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I always put buy orders in limit round lots, but usually end up with executed broken up pieces.
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Old 01-07-2019, 02:39 PM   #11
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I usually buy round lots, meaning in multiples of 100 shares. It's mostly out of habit, but I also keep in mind the possibility of writing option contracts on them, and contracts are only for round lots.

I never heard of buying fractional stock/ETF shares. I do not believe orders gotten sent out to the exchanges can be fractional. If your broker allows it, then he must be holding the remaining fraction for himself.

Occasionally, when I buy/sell say 500 shares at a certain set price, I may see 200 shares in one order, then the remaining 300 get filled a very short time later. I think it may be because the partial orders are filled with two different buyers/sellers on the other end. When this happens, the broker fee is the same as if the 500-share order is filled in one shot, meaning I am not charged twice (but now all my orders are free anyway).
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Old 01-07-2019, 03:33 PM   #12
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Heh.... when I buy AMZN, it's always odd lot I used to be of the mindset of increments of 100 and avoided stocks like AMZN. But then the more I thought about it, I'm more interested in how much I want to invest, not how many shares. And cost of the trade is all the same whether it's 20 @ $1,500 or 200 @ $150. And the cost per share is also all relative to the investment amount. But smaller priced stocks still just habit to buy in round lots just for convenience I guess. But I have occasionally went with 250 or 350 "just because" as well.
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Old 01-07-2019, 05:10 PM   #13
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I never heard of buying fractional stock/ETF shares. I do not believe orders gotten sent out to the exchanges can be fractional. If your broker allows it, then he must be holding the remaining fraction for himself.
You can't place an order to buy a fractional number of shares. However, if you have dividends reinvested, you are credited with fractional shares and the position in your portfolio will show as fractional shares. When it comes time to sell, you can sell the fractional shares and your broker cashes them out.
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Old 01-07-2019, 05:26 PM   #14
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Thanks. I have never done dividend reinvestment with stocks, so did not know how it is handled.

Mutual funds on the other hand are bought on the dollar amount basis; fractional shares are the norm and not the exception.
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Old 01-07-2019, 05:34 PM   #15
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In the old days when computer trading did not exist and one had to call his broker to make a trade, there was a thing called "Odd Lot Technical Indicator".

The theory is that small investors who deal in small odd lots are usually wrong. So, if there are a lot of odd lots orders when the market is up, one should sell.

The converse is true when the market is down and there are a lot of odd lot orders.

This odd lot theory has been disproved, and not too many mention it anymore.
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Old 01-07-2019, 06:04 PM   #16
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It bugs me to get filled on something in an odd number, like getting 978/1000 shares filled on an order.

I guess that says something. But I only check that our front door is locked two or three times before leaving the house. Normal, right?
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Old 01-07-2019, 06:15 PM   #17
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I love getting partial fills because it tells me that I set the limit price right at the point of pain for the other parties.
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Old 01-07-2019, 07:17 PM   #18
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I love getting partial fills because it tells me that I set the limit price right at the point of pain for the other parties.
Maybe, but it is painful to place an order for 200 shares and have it filled with only 37. Happened to me on a somewhat thinly traded preferred. I was OK as glad to get the shares at my price and had better luck the next day, though it cost me the $4.95 commission for the second days trade.
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Old 01-07-2019, 07:37 PM   #19
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Originally Posted by jim584672 View Post
In the old days there was a 1/4 point differential for under 100 share orders. These days it makes no difference. Shares only trade in whole shares. Today some brokers will hold a fraction on your behalf.
Yeah....back in the days of 1/4 or 1/8th point pricing, 5 day settlement, etc. I think round lots are a thing of the past. I just buy whatever # of whole shares I can afford. I guess younger investors wonder what the ol timers are talking about.
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Old 01-07-2019, 11:30 PM   #20
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I love getting partial fills because it tells me that I set the limit price right at the point of pain for the other parties.
+1
Or when the order sits for 1/2 hour or so before finally getting hit. Means I guessed the price well.
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