In what scenario might an odd lot be referenced?

In what scenario might an odd lot be referenced?

• A. When a trader is buying standard board lots
• B. When a transaction involves fewer than 100 shares
• C. When a trader is executing a large block trade
• D. When a transaction involves international securities

Answer: (B)

An odd lot is specifically referenced when a transaction involves fewer than 100 shares. This is a standard definition in trading terminology. In the context of the stock market, securities are typically traded in standardized quantities known as "board lots," which are usually made up of 100 shares. When a transaction involves fewer than this amount, it is categorized as an odd lot.

This concept is important because odd lot transactions can have different characteristics in terms of liquidity, pricing, and execution compared to standard lot trades. Traders may face differences in spreads or execution time with odd lots due to the lower volume. Understanding this distinction is crucial for effective trading strategies and market operations.