A board lot is a group of shares that are sold as a solid block on a stock exchange. When this type of block trade is made, the exchange where the securities are traded tend to consider the transaction as involving a single trading unit. By utilizing a board lot approach, the process of selling securities is greatly simplified, since calculating the purchase prices for the lot is easier for both the buyer and the seller.
In many instances, an exchange will use a standard number to define a board lot. The figure offered for many groups of securities is 100 shares. With many exchanges, the unit price of the shares may play a role in determining how many shares are included in the board lot. For example, an exchange may prefer securities with a higher unit price to be sold in lots of 100 shares, while securities with relatively low prices are sold in larger lots, such as a thousand shares. As long as it is clear how a given exchange prefers the lots to be configured, it is easy to understand how many shares are included in a particular lot.
Utilization of the board lot approach helps to minimize the potential for what is known as odd lots. An odd lot is any group of securities offered for sale that contain a number other than the standard board lot. If the standard is set at one hundred shares as the round or board lot, then an odd lot would be a group of 24 or 37 shares offered for sale. Since many investors prefer to buy and sell using round lots, it is difficult for brokers to find buyers for odd lots. By standardizing the lots on the exchange, brokers can find buyers much easier, and investors who are looking to sell some of their securities are much more likely to attract the attention of those potential buyers.
On some exchanges, the lot may be structured to include different stocks and securities as part of the package or lot. Sometimes referred to as a mixed lot, this type of lot can be attractive to investors who want to gain control of as many shares of a given security as possible, even if it means purchasing those shares in a piecemeal fashion. The concept of the mixed lot can also allow investors who do not have enough shares to compose a round lot to combine those shares with other securities, reach the standard board lot figure, and thus increase their chances for finding a buyer.