Fractional Shares

Study Notes:

Clients can allocate a sum of money when investing in stocks rather than buying a specified number of shares. Since many share prices have increased in value over time, investors can buy relatively fewer shares than in years gone by. To help investors put money into stocks they wish to own, Interactive Brokers has created the ability to transact shares in fractional amounts.

To use fractional share trading clients need to permission their account to do so within Client Portal. Log in from interactivebrokers.com and select the head and shoulders icon to the upper right. Click on Settings and scroll down to trading and locate and click on Trading Permissions.

Select the icon for Stocks. Scroll to the bottom of the regions. Check the box next to Global (Trade in Fractions). Click the Continue button to the lower right of the screen. 

Fractional share trading is available for eligible US, Canadian and European stocks (and certain ETFs). The benefit to investors is that they can invest a small amount, say $100 and create a portfolio of several stocks, each of which has a share price higher than $100. In this case, the investor divides $100 equally across four names resulting in very small amounts of fractional shares in each. If the purchase price doesn’t result in a whole number of shares, IBKR buys (or sells) fractional shares for you.  

To create an order in TWS using fractional shares, in the Order Entry panel click within the quantity field and from the pop-up quantity selector choose the currency selection, in this case USD, rather than Shares. The user selects the amount to invest or types the desired amount directly into the input field. In this case the user types $100 into the field. The quantity field now displays QTY 100 USD. Next, the user chooses a time-in-force for the order. In this case since the user leaves the default Limit order in effect, he or she will specify the limit price to pay. When ready, the user clicks the Submit button. An order confirmation will appear and when ready, clicks Transmit to send the order. 

Don’t forget that you will need to enable fractional share trading permission within Client Portal to activate this feature. 

Resources:

Fractional Trading