Orders
The
Market Order
The market order is the most frequently
used order. It is a very 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.
The
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. In most instances,
the market must trade BETTER than the limit
price for the customer to get a fill.)
OR
Better
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."
Market
If Touched (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.
Stop
Orders
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.
Stop
Limit Orders
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.
Stop
Close Orders
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.
Market
on Opening
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.
Market
on Close
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.
Fill
or Kill
The
fill or kill order is used by customers
wishing an immediate fill, but at a specified
price. Our floor broker will bid or offer
the order three times and immediately return
either a fill or an unable.
One
Cancels the Other (OCO)
This
is a combination of two orders written on
one order ticket. This instructs our floor
personnel that once one side of the order
is filled, the remaining side of the order
should be cancelled. By placing both instructions
on one order, rather than two separate tickets,
the customer eliminates the possibility
of a double fill. (This order is not acceptable
on all exchanges.)
Spread
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 cat
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