Must-Know for Small Investors! Complete Guide to Fractional Share Trading: Time, Costs, and Tips in One Go

What are odd lots? Why do investors need to understand them?

Odd lots refer to stock holdings of fewer than 1,000 shares. In Taiwan, the standard trading unit is 1 lot (1,000 shares), but investors sometimes hold scattered shares less than 1,000. The minimum trading unit for odd lots is 1 share, and these small holdings usually come from unfilled orders, leftover shares during stock distribution, or active odd lot trading by investors.

Odd lot trading is a trading mode specifically for 1 to 999 shares. In the past, odd lot trading was limited to after-hours trading, but since October 26, 2020, investors can trade odd lots during regular trading hours, which is a significant benefit for small investors.

When does odd lot trading occur? An overview of during and after trading hours

During trading hours

• Trading time: 9:00-13:30
• Order method: Electronic orders only (via broker trading platform)
• Matching method: First, a call auction at 9:10, then continuous matching every minute using call auction
• Transaction priority: Price priority, then submission time for orders at the same price

After trading hours

• Trading time: 13:40-14:30
• Order method: Electronic or manual phone orders
• Matching method: Single call auction at 14:30
• Transaction priority: Price priority, then random order for orders at the same price

Important reminder: Unfilled orders during trading hours are not automatically carried over to after-hours trading; investors need to resubmit orders. Unfilled orders after hours are automatically canceled and do not carry over to the next trading day. This is especially important for investors aiming for successful after-hours trading—strategies should be adjusted based on different trading session characteristics.

Core features of odd lot trading

Odd lots can also receive dividends and stock distributions

As a shareholder, odd lot holders are entitled to receive dividends. During dividend distribution, fractional shares less than one share are paid out in cash or sold collectively, with proceeds distributed to odd lot holders.

Minimum transaction costs and order thresholds

The minimum purchase for a single odd lot transaction is 1 share. In theory, investing in odd lots can start with as little as 1,000 yuan. However, considering transaction fees, it’s better to aim for a total amount of over 10,000 yuan per transaction; otherwise, high fees relative to the investment amount may lead to losses.

Odd lots can be bought and sold

Taiwan Stock Exchange explicitly recognizes the legality of buying and selling odd lots. As investment needs diversify, odd lot trading is becoming more popular and is very convenient for small investors engaging in regular, fixed investments.

How are odd lot transaction fees calculated? Comparison of major brokers

The fee calculation for odd lot trading is the same as for regular lots, both at 0.1425% of the buy or sell amount. Brokers set “minimum odd lot fee” and “discounts for electronic orders.”

Example calculation: Buying 200 shares of TSMC (current price 1065 yuan)

• Basic fee: 200 × 1065 × 0.1425% = 303.53 yuan
• With a 50% discount: 303.53 × 50% = 151.77 yuan

Major broker fee comparison table

Different brokers offer varying levels of fee discounts. Investors should choose a broker based on their trading frequency to get the best deal.

How to sell odd lots effectively? Practical trading tips

Although odd lot trading is included in regular trading hours, liquidity for less popular stocks remains low, and investors may not always be able to execute trades smoothly. Here are practical tips to improve the chances of successful transactions and optimize after-hours trading success rates.

Strategy 1: Convert odd lots into whole lots

For difficult-to-sell odd lots, consider “converting odd to whole”—for example, if an investor holds 700 shares of a less popular stock, they can buy 300 more shares to reach 1,000 shares (1 lot), then sell through more active whole lot channels. Whole lot trading generally has higher liquidity and success rates than odd lot trading.

Strategy 2: After-hours order placement tricks

Since after-hours trading at 14:30 involves only one call auction, investors can leverage this:

• Urgent buy: Place a buy order at the limit-up price; based on maximum transaction principle, the chance of execution is highest.
• Urgent sell: Place a sell order at the limit-down price; similarly, the highest probability of execution.

While this method may not offer the best price, it can significantly increase the success rate of after-hours trades.

Advantages and disadvantages of odd lot trading

Main advantages

Low capital requirement: Compared to whole lot trading, odd lot trading greatly lowers entry barriers, allowing investors with limited funds to participate in the stock market. Investors can maintain sufficient liquidity for daily expenses or other investment opportunities.

Flexible testing: Odd lot trading is a good way to “test the waters” in the stock market. Without large capital, investors can gradually accumulate positions through regular, fixed investments.

Main disadvantages

Poor liquidity: Compared to whole lots, odd lots have lower trading volume and longer matching times. Even with various techniques, some less popular stocks’ odd lots may be difficult to execute immediately.

Relatively high fees: Odd lot transactions have minimum fee limits (usually starting at 20 yuan). Small transactions may have high fee ratios; for example, buying 5,000 yuan worth of odd lots could incur over 100 yuan in fees, accounting for about 2%, which is significant. Additional service fees may also apply.

Trading process limitations: Odd lots can only be sold, not bought; all shares must be sold at once; converting odd lots to whole shares is time-limited and expires; if the broker’s inventory is insufficient, investors may not get the desired quantity.

Other trading options suitable for small investors

If concerned about high fees and low liquidity in odd lot trading, investors can consider Contracts for Difference (CFD) as an alternative.

CFD is a popular financial derivative that allows traders to profit from price differences without owning the actual stock. Advantages include:

• Very low capital requirement: Only a small margin (usually 5-10%) is needed. For example, buying 5 shares of Google at $2000 each might require only $100 via CFD.
• Transparent costs: No extra commissions, only spread costs, with no liquidity risk.
• More flexible trading: Suitable for short-term traders seeking quick trades.

Note: Odd lot trading is more suitable for long-term investors holding positions over time; CFD trading involves daily settlement, and overnight positions accrue interest, making it more suitable for short-term strategies. Investors should choose based on their investment style and time horizon.

Summary

Odd lot trading has become an important way for small investors in Taiwan to participate in the stock market. Compared to traditional whole lot trading, odd lots do not require an initial investment of 1,000 shares; investors can buy flexibly according to their needs. By using online orders, understanding trading hours, and mastering advanced techniques (like converting odd to whole lots and after-hours order placement), investors can effectively improve their chances of successful transactions.

However, successful odd lot investing requires sufficient knowledge. First, understand your risk tolerance and choose appropriate strategies; second, learn basic investment analysis to evaluate stocks’ fundamentals; third, stay rational, avoiding herd mentality and impulsive trades. With scientific trading methods and a steady mindset, small investors can also achieve desirable returns in the odd lot market.