Odd Lotter

An odd lotter is an individual investor who buys securities, usually stocks, in odd lots, or in amounts that are not multiples of 100. An odd lotter differs from larger investors, who typically buy in round lots, or multiples of 100.

Typically, stocks are purchased in round lots of 100 shares. So, for the purchase of a small investor, or odd lotter, to occur, they will be bundled into orders of 100 shares and distributed after purchase. Because these small amounts are less efficient to purchase, small investors typically pay higher commissions.

The presence of odd lotters gave rise to a theory in technical analysis — odd lot theory — that has since fallen out of favor. It was once held that odd lotters are ill-informed, so their trading behavior could serve as a contra-indicator. That is, trading in a manner that was the opposite of odd lotters was believed to be a strategy would be profitable. If a stock was being heavily bought by odd lotters, selling this stock should produce gains, according to the theory. This theory, which was never very well supported, fell out of favor as small investors increasingly opted for mutual funds over individual stocks.

The belief that the behavior of individual investors is a contra-indicator has not fallen out of favor completely, however. Some point to the survey of investor sentiment conducted by the American Association of Individual Investors as evidence.