The term “mixed lot” is used in several different senses in relation to finance, including in discussions of lots for auction, mixed lots of real estate, and in securities trading. This article focuses on its use in securities trading, where a mixed lot is comprised of a combination of a round order and an odd lot for securities, allowing a trader to make a trade for an odd number of securities. An order for a mixed lot is conducted like those for other kinds of securities trading.
In securities trading, for convenience, people work with standard numbers in trading, like 100 units. When someone places an order for something like two lots, it means the person wants 200 units of the security being traded. A whole order of this nature is known as a round order. If someone wants to buy a different amount, like 75 units, it is an odd lot.
Someone buying less than 100 securities would place an order for an odd lot. Someone buying more than 100 would need a mixed lot including one or more round lots, plus the odd lot to make up the difference. For example, someone who wants to buy 250 shares of a security would place a mixed lot: two round orders, and one odd lot of 50 shares. Likewise, people selling securities can enumerate them in the same ways, making people aware of the number of shares available for purchase.
Mixed lots can be bought and sold freely on markets all over the world. Different markets may have different standard orders and it is important to be aware of this when conducting trades. A round order in one commodity trading market, for example, might be 1,000 units, in contrast with 100 units of a security being traded in another market. Investors are usually not readily forgiving of mistakes made by people who are not familiar with trading conventions and it is advisable to study before executing trades.
Large and institutional investors tend to place their orders in round lots. An uptick in trading of odd lots can be indicative of a panic on the part of lower level investors. These investors usually cannot afford to trade in round lots and when they grow concerned about their portfolios, they place buy and sell orders for odd lots to change their position in the market. According to “odd lot theory,” bigger investors pay attention to such trades, as they can indicate a shift in the market from below.