An even lot is a term used in investing circles to describe the quantities involved in a given investment opportunity. In terms of shares of stock, an even lot is often the number of shares that a particular market considers the standard trading unit for that marketplace. The term is also used to describe what is considered the usual quantities that are involved in the trading of futures contracts, as well as the number of bonds that may be involved in a standard transaction.
The even lot establishes a standard for trading on different markets. Unless otherwise stated, the assumption is that transactions will involve even lots. Investors may have the opportunity to purchase quantities of a given security that are different from this standard. Many markets allow for trading what is known as an odd lot, which is simply a quantity that is less than the standard amount that is considered even within that market.
It is important to note that the number of units involved in an even lot may vary, both in terms of the type of investment involved and the standards of a given market. In general, an even lot of shares of a given stock is considered 100 shares. Bonds may be traded in sets of five, while commodities may be sold in lots of 100 or some other specified amount and considered even. Many markets across the world choose to use the same standards for determining what constitutes an even lot. As more and more investors have become involved in making international investments, this degree of uniformity has made it easier to track what is happening in each market and respond in a manner that is likely to protect the interests of each investor.
Dealing in even lots has advantages for both investors and the markets in which the investments are traded. By establishing a standard, investors can quickly determine how much it will take to buy a single lot of a security, without having to stop and think about how many shares that would involve. At the same time, markets can process and track the orders with a greater degree of efficiency, since the lots make use of that standard. Sellers also can quickly calculate the returns on the securities they are currently trading, which in turn makes it easier to respond to market conditions in a shorter period of time and possibly avoid a loss if the price of the securities in question are entering into a period of decline.
