Types of Orders

Online brokerages provide many types of orders to cater to the various needs of the investors. The common types of orders available are market orders, limit orders and stop orders.

Market Order

With market orders, you are instructing your broker to buy or sell the options at the current market price. If you are buying, you will be paying the asking price. If selling, you will be selling at the bid price. The advantage of using market orders is that you will fill your order fast (often instantly) but the disadvantage is that you will usually end up paying slightly more, especially when the order is large and the trading volume thin.

Limit Order

With limit orders, you will specify the price you wish to transact. If you are buying, you are instructing your broker to buy at no higher than the specified price. If selling, you are telling him to sell at no less than your stated price. The advantage of using limit orders is that you are in full control of the price at which you buy or sell your options. The disadvantage is that filling the order will take some time, or the entire order may not get filled at all because the underlying stock price has moved way beyond your desired price.

Stop Loss Order

Stop loss orders are orders that only gets executed when the market price of the underlying stock reaches a specified price. They are used to reduce losses when the underlying asset price moves sharply against the investor.

Stop Market Order

A stop market order, or simply stop order, is a market order that only executes when the underlying stock price trades at or through a designated price. Buy stops, designed to limit losses on short positions, are placed above current market price. Sell stops are used to protect long positions and are placed below current market price.

While the stop market order  guarantees execution, the actual transacted price maybe slightly lower or higher than desired, especially when the underlying price movement is very volatile.

Stop Limit Order

A stop limit order is a limit order that gets activated only when the underlying stock price trades at or through a specifed price. While a stop limit order provides complete control over the transaction price, it may not get executed if the underlying price moves too quickly and the limit price is never reached.

Ready to Start Trading?

Open an account at OptionsHouse.com and get 100 commission-free trades + free virtual trading tool!

Your new trading account is immediately funded with $5,000 of virtual money which you can use to test out your trading strategies using OptionHouse's virtual trading platform without risking hard-earned money.

Once you start trading for real, your first 100 trades will be commission-free! (Make sure you click thru the link below and quote the promo code '60FREE' during sign-up)

Click here to open a trading account at OptionsHouse.com now!

Follow Us on Facebook to Get Daily Strategies & Tips!

Options Basics

Options Strategies

Options Strategy Finder

Outlook on Underlying:

Profit Potential:

Loss Potential:


No. Legs:

Join the Discussions @ The Options Forum

Beginners Questions

Advanced Strategy Talks

RSS Feed Widget

Trading Ideas & Opportunities

Home | About Us | Terms of Use | Disclaimer | Privacy Policy | Sitemap

Copyright 2016. TheOptionsGuide.com - All Rights Reserved.