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Note:
The same order may have different meanings depending on whether the
order is to be executed in pit trading or through an electronic
exchange.
Market
Order
The market order is the most frequently used order. It is a good order
to use once you have made a decision about opening or closing a
position. It can keep the customer from having to chase a market trying
to get in or out of a position. The market order is executed at the
best possible price obtainable at the time the order reaches the
trading pit.
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Limit
Order
The limit order is an order to buy or sell at a designated price. Limit
Orders to buy are placed below the market while limit orders to sell
are placed above the market. Since the market may never get high enough
or low enough to trigger a limit order, a customer may miss the market
if he uses a limit order. (Even though you may see the market touch a
limit price several times, this does not guarantee or earn the customer
a fill at that price.)
-
When buying, if the order price
is lower than (below) the current market price, it is a Buy Limit.
- As an example, with the
market trading at 7800, Buy 1 Dec DJIA 7700 on a Limit (or
better…fill at 7700 or lower). Order can only be filled at
the stated price (7700) or lower (better).
-
When selling, if the order
price is higher than (above) the current market price, it is a Sell
Limit.
- As an example, with the
market trading at 7800, Sell 1 Dec DJIA 7900 on a Limit (or
better…fill at 7900 or higher). Can only be filled at the
stated price (7900) or higher (better).
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Stop
Order
Stop orders can be used for three purposes:
-
to minimize a loss on a long or
short position;
-
to protect a profit on an
existing long or short position; or
-
to initiate a new long or short
position.
A buy stop order is placed above the market and a
sell stop order is placed below the market. Once the stop price is
touched, the order is treated like a market order and will be filled at
the best possible price.
When buying, if the order price is higher than (above) the current
market price, it is a Buy Stop.
o As an example, with the market trading at 7800, Buy 1 Dec DJIA 7900
Stop. Can only be filled at the Market, after the Market trades (or is
"offered") at 7900 or higher.
When selling, if the order price is lower than (below) the current
market price, it is a Sell Stop.
o As an example, with the market trading at 7800, Sell 1 Dec DJIA 7700
Stop. Can only be filled at the Market, after the Market trades (or is
"bid") at 7700 or lower.
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Stop
Limit Order
A stop limit order lists two prices and is an attempt to gain more
control over the price at which your stop is filled. The first part of
the order is written like the above stop order. The second part of the
order specifies a limit price. This indicates that once your stop is
triggered, you do not wish to be filled beyond the limit price. Stop
limit orders should usually not be used when trying to exit a position.
If a customer does not give a limit price, then the stop price and the
limit price are meant to be identical.
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Stop
Close Order (SCO)
The stop price on a stop close only will only be triggered if the
market touches the stop during the close of trading. The disadvantage
of this order is a fast market in the last few minutes of trading may
cause the order to be filled at an undesirable price. It can, however,
protect the customer from getting filled during adverse price
fluctuations during the course of the day.
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Market
If Touched Order (MIT)
MITs are the opposite of stop orders. Buy MITs are placed below the
market and Sell MITs are placed above the market. An MIT order is
usually used to enter the market or initiate a trade. An MIT order is
similar to a limit order in that a specific price is placed on the
order. However, an MIT order becomes a market order once the limit
price is touched or passed through. An execution may be at, above, or
below the originally specified price. An MIT order will not be executed
if the market fails to touch the MIT specified price.
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Good
Until Canceled Order (GTC)
Good Till Canceled (or Open Order). Used in conjunction with a Limit or
Stop order. Order will remain valid and worked until client cancels
order, or it is filled, or contract expires.
GTC Order Does Not Cancel Automatically!
-
As an example, you are long 1
Dec DJIA and have a GTC order to sell 1 Dec DJIA @ 7700 Stop. You
decide to sell your 1 long Dec DJIA on a Market order. Your GTC order
must be canceled…or you will sell (short) 1 Dec DJIA if the
market trades (or is "bid") at 7700 or lower.
If an order is not designated Good Till Canceled,
it is a Day Order and will expire at the end of the current trading
session unless filled or canceled prior to the close.
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One
Cancels the Other Order (OCO)
One (order) Cancels (the) Other.
-
As an example, with the market
trading at 7800 you want to buy at 7600 Limit (lower), or on an upside
breakout at 7900 Stop (higher), Buy 1 Dec DJIA 7600 on a Limit, OCO Buy
1 Dec DJIA 7900 Stop.
When one order is executed, the other is
automatically canceled.
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Market
on Close (MOC)
This is an order that will be filled during the final seconds of
trading at whatever price is available. PLEASE NOTE: A FLOOR BROKER
RESERVES THE RIGHT TO REFUSE AN MOC ORDER UP TO FIFTEEN MINUTES BEFORE
THE CLOSE DEPENDING UPON MARKET CONDITIONS.
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Market
on Opening (MOO)
This is an order that the customer wishes to be executed during the
opening range of trading at the best possible price obtainable within
the opening range. Not all exchanges recognize this type of order. One
such exchange is the Chicago Board of Trade.
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Enter
and Cancel Order
All orders, except Market Orders, can be canceled and replaced with a
different order unless filled prior to cancellation.
-
As an example, you are long 1
Dec DJIA and have a GTC order to sell 1 Dec DJIA @ 7700 Stop. With the
market trading at 7800, you decide to sell your 1 long Dec DJIA on a
Market order, Sell 1 Dec DJIA @ Market, Cancel selling 1 Dec DJIA 7700
Stop on GTC order No. 12345.
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Spread
Order
The customer wishes to take a simultaneous long and short position in
an attempt to profit via the price differential or "spread" between two
prices. A spread can be established between different months of the
same commodity, between related commodities or between the same or
related commodities traded on two different exchanges. A spread order
can be entered at the market or you can designate that you wish to be
filled when the price difference between the commodities reaches a
certain point (or premium). For example: BUY 1 JUNE LIVE CATTLE, SELL 1
AUGUST LIVE CATTLE PLUS 100 TO THE AUGUST SELL SIDE. This means that
the customer wants to initiate or liquidate the spread when August
Cattle is 100 points higher than June cattle.
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Or
Better Order
The pit broker is obligated to get the best possible price for the
customer. Putting an OB on an order does not cause him to work harder.
If the price is NOT OB, the broker is irritated because he is paying
special attention to a ticket that does not deserve it. Think of OB as
MARKET with a LIMIT. If the price does not have an OB next to it, and
the market is considerably better, the pit broker may question the
runner to see if the order should have been a stop. They will return
the order for clarification which could delay the filling of the order
and possibly change the results of the fill. ONLY USE "OR BETTER" IF
THE MARKET IS "OR BETTER."
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Fill
or Kill Order (FOK)
The fill or kill order is used by customers wishing an immediate fill,
but at a specified price. The floor broker will bid or offer the order
three times and immediately return either a fill or an unable.
If you are not sure how to enter an order, ask your broker! Not all
exchanges accept all types of orders.
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