Complete Guide to Odd Lot Trading: How Can Small Investors Smartly Buy and Sell Odd Lots? What Are the Advantages of After-Hours Trading?

Fractional share investing has become an important way for small investors in Taiwan to enter the stock market. Unlike traditional whole-share trading, fractional trading has lower barriers and more flexible operations. Especially with the introduction of after-hours trading, investors now have more time to plan their trading strategies. This article will analyze in detail the trading mechanisms, fee structures, and practical buying and selling tips for fractional shares.

Understanding Fractional Shares: Investing Starting from 1 Share

What are fractional shares?

Stock trading is usually measured in “lots,” with 1 lot equal to 1,000 shares. However, investors often hold less than 1,000 shares, and this portion is called fractional shares, with the minimum trading unit being 1 share.

There are typically three reasons for fractional shares:

• Orders that are not fully executed (due to price fluctuations or insufficient volume)
• Scattered shares resulting from stock dividends or allotments
• Investors actively trading fractional shares

Why are fractional shares worth paying attention to?

Fractional trading breaks the “minimum of 1,000 shares” restriction, allowing investors with limited funds to participate in buying and selling stocks of their favorite companies. It is an ideal choice for regular fixed-amount investments.

Intraday vs. After-hours: Complete Analysis of Fractional Share Trading Hours

Fractional share trading hours are divided into intraday trading and after-hours trading, each with its own features:

Features of Intraday Trading:

The intraday fractional trading period coincides completely with whole-share trading hours, providing investors with ample trading windows. Investors can start submitting fractional share orders via broker platforms from 9:00 AM. However, note that during intraday hours, orders can only be placed electronically. If orders placed during the day are not fully executed or only partially filled, these unfilled orders will not automatically carry over to after-hours, and investors must resubmit orders during the after-hours period.

Advantages of After-hours Trading:

The after-hours period offers additional trading opportunities, especially suitable for office workers and investors who cannot monitor the market during the day. From 13:40 to 14:30, investors can place orders electronically or call their brokers for after-hours trading. Since only one auction occurs at 14:30, if the order is not executed, it will be automatically canceled and will not carry over to the next day.

Basic Regulations for Fractional Share Trading

Fractional shares can also receive dividends

Holders of fractional shares are entitled to dividends. Although the amounts are small, during dividend distribution, fractional shares can be converted into cash or sold collectively.

Minimum trading unit is 1 share

Investors can buy as few as 1 share of fractional shares, with each order not exceeding 999 shares. For regular fixed-amount investing, it is recommended to buy at least NT$10,000 worth per transaction to avoid high transaction costs eating into returns.

Fractional shares can be sold

Taiwan Stock Exchange explicitly allows buying and selling fractional shares. Investors are free to buy or sell during intraday or after-hours trading sessions. As the trading system improves, fractional shares have become a relatively liquid trading product.

How are transaction fees for fractional shares calculated?

The fee calculation for fractional and whole shares is exactly the same, both at 0.1425% of the transaction amount. However, different brokers set different minimum fee standards for fractional shares, usually between NT$1 and NT$20.

Fee calculation example:

Buying 200 shares of TSMC (closing price NT$1,065):

• Basic fee: 200 × 1,065 × 0.1425% = NT$303.53
• With a 50% electronic order discount: NT$303.53 × 50% = NT$151.77

Comparison of major brokers’ fees:

How to effectively sell fractional shares? Practical buying and selling tips

Although after-hours trading provides more trading sessions, the trading volume for non-popular stocks’ fractional shares remains limited. Investors may not be able to execute trades immediately.

Tip 1: Convert fractional to whole shares

When facing difficulty executing fractional trades, consider the “convert fractional to whole” strategy. For example, if holding 700 shares of a less popular stock with low intraday volume, you might buy an additional 300 shares to make a full lot (1,000 shares), then sell the whole lot in the more active whole-share market, increasing the likelihood of successful transactions.

Tip 2: Leverage the auction feature of after-hours trading

Since after-hours trading involves only one auction following the “maximum transaction principle,” the following strategies apply:

• To buy quickly, place a buy order at the limit-up price; the chance of successful purchase is highest.
• To sell quickly, place a sell order at the limit-down price; the chance of successful sale is highest.

Tip 3: Take advantage of time differences

The matching mechanisms differ between intraday and after-hours:

• Intraday matches occur every minute, providing multiple opportunities to place orders.
• After-hours trading only matches once, requiring more precise order price setting.

Pros and cons of buying fractional shares

Advantages:

✓ Low capital threshold — starting from NT$1,000, suitable for small investors to do fixed-amount investments

✓ Low trial cost — no need for large capital to enter the stock market, understanding market operation mechanisms

✓ Flexible timing — combined with after-hours trading, even office workers can trade easily

Disadvantages:

✗ Relatively lower liquidity — fractional shares have much lower trading volume than whole shares, and matching may take longer

✗ High fee pressure — the minimum fee system means that small transactions have a higher fee ratio, sometimes exceeding investment returns

✗ Trading restrictions —

• Fractional shares can only be sold, not bought
• Must sell all at once; cannot sell in parts
• Converting fractional to whole shares is subject to time limits

Besides fractional shares, what other options do small investors have?

If concerns about liquidity and fees for fractional shares persist, small investors can consider other investment tools to participate in the stock market.

Contracts for Difference (CFD) as an alternative

CFD is a financial derivative where investors trade the price difference without holding physical stocks. Its advantages include:

• Lower barriers: only require a margin deposit (usually 5-10%), controlling larger positions with small capital
• No additional commissions: brokers charge only spreads, with transparent costs
• Sufficient liquidity: no worries about execution issues

Differences between the two investment methods:

Fractional shares are suitable for long-term investors who want to receive dividends over time; CFDs are settled daily and are more suitable for short-term traders. Holding CFDs overnight incurs overnight interest. Investors should choose tools based on their investment style.

Summary

With continuous improvements in trading systems, fractional share trading has become an important gateway for Taiwanese investors to enter the stock market. From the morning 9:00 intraday trading to the 14:30 after-hours trading, investors have ample time to plan their strategies.

To succeed in the fractional share market, small investors should:

• Fully understand trading hours and fee mechanisms to make cost-effective decisions
• Master practical techniques like “convert fractional to whole”
• Choose suitable investment strategies based on their risk tolerance
• Maintain rationality and avoid blindly following trends

Whether through fixed-amount investments in fractional shares or exploring other tools, continuous learning and patience are essential for small investors to become mature investors.