A Complete Guide to Fractional Share Investing: From Trading Rules to Cost Calculation, Essential Profit Tips for Small Investors

Understanding Odd Lots: Why Should You Know How to Calculate Them?

Trading in odd lots has become the gateway for retail investors in Taiwan. Unlike traditional full lots (1 lot = 1000 shares), odd lots refer to stocks less than 1000 shares, with the minimum trading unit being 1 share. These odd lots often originate from unfilled buy/sell orders, rapid stock price fluctuations, or corporate stock allocations.

Understanding how to calculate odd lots is crucial—it directly impacts investment returns. Odd lot transactions use the same fee rate (0.1425% of the buy or sell amount), but due to minimum fee restrictions, small investors need to calculate costs precisely to avoid the “fees eating into profits” dilemma.

Complete Guide to Odd Lot Trading Rules: Grasp the Intraday and After-hours Time Windows

October 26, 2020 marked a turning point for odd lot trading. Since then, investors are no longer limited to after-hours trading but have more flexible timing options:

Intraday Trading Hours (9:00-13:30)

• Only electronic orders supported (broker app orders)
• First match at 9:10, then continuous auction every minute
• Transaction priority: price first, then order time at the same price
• Unfilled orders are not retained for after-hours; must re-enter

After-hours Trading Hours (13:40-14:30)

• Supports electronic and telephone manual orders
• One final auction at 14:30
• Same price orders are randomly ordered by computer
• Unfilled orders are automatically canceled and do not carry over to the next day

This mechanism is especially critical for sellers—if an intraday order remains unfilled (e.g., asking too high), it must be re-listed after hours, or the trade cannot proceed.

How Are Fees Calculated: The Cost Trap Most Small Investors Overlook

Odd lot fees are calculated the same way as full lots, but minimum fee rules change the game. For example, buying 200 shares of TSMC (2330.TW, assuming close price of NT$1065):

Basic fee: 200 × 1065 × 0.1425% = NT$303.53

However, most brokers set a minimum fee of NT$1. If the transaction amount is small, the fee rate effectively increases. Here’s a comparison of mainstream brokers:

Using Fubon’s 18% discount, actual fee: NT$303.53 × 0.18 = NT$54.64, reducing the cost to about 18% of the original. This is why a minimum investment of NT$10,000 or more is recommended—otherwise, the fee ratio becomes too high, eroding returns.

Are Odd Lots Easy to Sell? Three Tips to Increase Transaction Success Rate

Low liquidity for non-hot stocks is a common pain point. For example, 信錦 (1582.TW) might have 700 shares in odd lots that take a long time to sell intraday. Here are three strategies to significantly improve the chances:

Strategy 1: Convert Odd to Whole Lots If you see a large sell order stuck at a high price intraday, consider reversing the approach: buy 300 shares to make a 1000-share lot, then sell the full lot in the more liquid market. Although this incurs an extra transaction cost, the certainty gained is often worth it.

Strategy 2: Extreme Price Tactics Since only one matching occurs after hours at 14:30, investors can use the “maximum transaction principle”:

• Urgent buy → place a bid at the limit-up price for the stock, maximizing the chance of execution
• Urgent sell → place a bid at the limit-down price for the stock, maximizing the chance of execution

This tactic is suitable when the investor has a clear direction and needs to exit quickly.

Strategy 3: Time Diversification If intraday orders fail, don’t rush to re-enter after hours. Reassess the market the next day and place new orders at better prices. Patience and clear holding logic are key.

The Double-Edged Sword of Odd Lots: High Barriers vs. High Costs

Advantages:

• Significantly lower capital threshold (buy as little as 1 share)
• Suitable for dollar-cost averaging and long-term strategies
• Allows “test water” investments with low learning costs

Risks:

• Much lower liquidity than full lots, leading to longer transaction times
• Minimum fee mechanism causes high cost ratios for small investments
• Limited trading process: only sell orders can be placed; buy orders are restricted
• Single transaction limit of 999 shares per order

Alternative: Small Capital Entry via CFD (Contract for Difference)

If concerned about liquidity and high costs of odd lots, CFD offers another route:

Compared to direct stock ownership, CFDs require only 5-10% margin to control the full position. For example, Google stock:

• Buying 5 shares at $400 each = $2000
• CFD trading 5 contracts at 5% margin = only $100

CFDs offer transparent spreads, no extra commissions, and high liquidity. But note: long-term holding is less suitable; CFDs are settled daily, and overnight positions incur interest costs, making them more suitable for short-term trading.

Decision Framework for Investing in Odd Lots

Choosing between odd lots and other tools depends on three questions:

1. Investment horizon?

• Over 6 months → odd lots (long-term holding)
• Within 1 month → CFD (short-term trading)

2. Single transaction amount?

• Over NT$10,000 → costs are reasonable
• Less than NT$10,000 → high fee ratio; consider CFD

3. Stock liquidity?

• Hot stocks like TSMC, MediaTek → quick transactions
• Less popular stocks → convert odd to whole lots or choose CFD

As odd lot trading becomes more convenient, small investors have more diverse options. But remember: understanding the cost structure and trading mechanisms is the foundation of steady profits.