Buying and Selling

Stock IStock I

Odd Lots vs. Round Lots

Real Time Orders vs. Regular Orders

Types of Real Time Orders

� When purchasing stock you can buy in either:

• A Round Lot

• An Odd Lot

• Mixed Lot Transactions

Odd Lots vs. Round Lots

ROUND LOTS

� A round lot is simply 100 shares of stock or

multiples of 100 shares of stock.

Round Lots

� An example of a round lot would be a

purchase of 300 shares of stock.

ODD LOTS

� An odd lot consists of less than 100 shares of

stock. Unless you are a wealthy individual, odd

lots will probably make up the bulk of your

stock transactions.

Odd Lots

� An example of an odd lot would be a

purchase of 25 shares of stock.

MIXED LOTS

� A mixed lot transaction consists of both round and

odd lots.

Mixed Lots

� An example of a mixed lot would be a � An example of a mixed lot would be a

purchase of 125 shares of stock

100 shares

(round lot)

25 shares

(odd lot)+ = 125 shares

(mixed lot)

REAL TIME

ORDERS VS.

REGULAR

ORDERSORDERS

Note: An order is synonymous with trade;

hence a real time order is like saying a

real time

trade or real time stock trade.

� A regular order is an order to buy or sell stock

at the price available at the time the order is

filled.

Regular Orders

� You put in an order for 2 shares of Starbucks

stock.

• The order isn't expedited immediately by your

broker.

• As a result, the market price for that stock may be

Example of Regular Orders:

• As a result, the market price for that stock may be

higher or lower when the order is finally filled by

your broker.

� Usually if you are involved with an automatic

investment plan or a direct investment plan

you will encounter regular orders.

Special Note:

� A real time order is an order to buy or sell stock immediately at the price available.

� The orders are filled immediately within minutes, if not seconds, from when the order was placed so the market price for that stock will change minimally, if at all, once the order

Real Time Orders

was placed so the market price for that stock will change minimally, if at all, once the order is filled.

� This is primarily a method used by day traders or stock traders, who monitor stock prices throughout the day.

� If you want to control the amount you spend

or limit the amount you lose on a stock, there

are a couple of options out there. Of course,

these special benefits come with a price in the

form of higher commission fees.

Types of Real Time Orders

form of higher commission fees.

COMMISSION

� Usually the commission for making real time

trades is much higher than placing regular

trades.

The Differences In Commission

LIMIT ORDERS

� A limit order is an order to buy at or below a

specified price or to sell at or above a

specified price.

� This way you control what you will pay for a

stock and what you will sell your stock for.

Limit Orders

stock and what you will sell your stock for.

� Investors use this strategy to limit their losses

and prevent over paying for a stock.

� You place a limit buy order to buy 75 shares of

Microsoft at $20:

• The stock is currently trading at $21 per share.

• Once the price falls to $20 or below per share your

broker will execute the order.

• Once the price exceeds $20 per share the broker will

Example 1 - Limit Orders:

• Once the price exceeds $20 per share the broker will

stop the order.

$21$20 BUY!

$21$20 STOP BUYING

� You place a limit sell order to sell 20 shares of

Starbucks at $22

• The stock is currently trading at $21.50 per share.

• Once the price rises to $22 or above your broker will

expedite the order.

• If the price falls below $22 the broker will stop the

Example 2 - Limit Orders:

• If the price falls below $22 the broker will stop the

order.

$22SELL!

$22STOP SELLING!

$21.50

Below

$22

� Keep in mind that these market prices may

never be reached; hence you may never buy

or sell stock at that particular price.

� These orders will not be activated until they

reach your specified price points.

Limit Orders, cont’d

reach your specified price points.

� You can place a limit order in one of these

forms:

1) A fill or kill order, which simply means that if the

limit order cannot be filled immediately, it is

canceled.

Different Forms of Limit Orders

canceled.

2) A day order means that if the limit order is not

executed by the end of the day, it is canceled.

3) A good-till-canceled order means the limit order

is in effect unless executed, canceled, or

renewed.

STOP-LOSS

ORDERS

� A stop-loss order is an order to sell a stock

when the market price reaches or drops

below a specified level.

� This minimizes your loss on your investment in

a stock.

Stop-Loss Orders

a stock.

� Special Note: All of these orders happen in

real time once activated or your specific

market price is reached.

� You have stock in ExxonMobil; the stock is

currently trading at $95 per share.

• You place a stop loss order with your broker to sell

if the price drops below $90 per share.

• Once it hits $89 per share your order is activated

Example of Stop-Loss Order:

• Once it hits $89 per share your order is activated

and you sell at the best price available to avoid a

big loss, hence stop-loss.

� Stock is bought and sold in round lots, odd

lots, or mixed lots. You can place orders to buy

and sell stock in real time or by regular order,

which is associated with automatic investment

plan or direct investment plan. If you want to

In Summary:

plan or direct investment plan. If you want to

control what you spend and lose on stock you

can place special real time orders called limit

orders and stop-loss orders.