Placing Orders
The types of orders most commonly used are briefly described below. Orders can be
placed as Good Til Canceled (Open Orders) or Day Orders. Of course Market Orders
are neither, they are filled ASAP.
1. The Market Order
The market order is the most frequently used order and is the best order to use
if you want to have an order filled ASAP. The market order is executed at the best
possible price obtainable at the time the order reaches the trading pit. EXAMPLE:
A sell order at the "market" might be: "Sell 5 December Corn at the Market".
2. Limit Orders
The limit order is an order to buy or sell at a designated price. Limit orders to
buy must have a price below the last trade while limit orders to sell must have
a price above the last trade. Because the market may never reach a limit price the
order may be unable. Even though you may see the market touch a limit price several
times, this does not guarantee a fill. In most instances, the market must trade
through the limit price to receive a fill. EXAMPLE: Let's assume December Corn last
traded/settled at 240. A limit order to buy might read "Buy 3 December Corn at 232".
A limit order to sell might be "Sell 3 December Corn at 246.5
3. Stop Order
Stop orders can be used for three purposes:
a. to minimize a loss on a long or short position,
b. to protect a profit on an existing long or short position, or
c. to initiate a new long or short position.
A buy stop order must always be placed above the market and a sell stop 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. EXAMPLE: Let's assume December Corn
last traded/settled at 240. A buy stop order might read "Buy 3 December Corn at
249 stop". A sell stop order might be "Sell 3 December Corn 231.5 stop".
4. 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. EXAMPLE: Let's assume December Corn last
traded/settled at 240. A buy MIT might read "Buy 3 December Corn at 225 MIT". A
sell MIT might be "Sell 3 December Corn 249 MIT".
5. Or Better
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." EXAMPLE: Let's assume December
Corn last traded/settled at 240. A buy OB order might read "Buy 3 December Corn
at 241 OB".
PLEASE NOTE; WHILE STOPS AND M.I.T.'S ARE NORMALLY ELECTED ONLY WHEN THE SPECIFIC
PRICE IS TOUCHED, THEY CAN BE ELECTED WHEN THE OPENING OF A MARKET IS SUCH THAT
THE PRICE IS THROUGH THE STOP OR MIT LIMIT. IN THIS CASE, THE CUSTOMER CAN ROUTINELY
EXPECT THE FILL TO BE MUCH WORSE THAN THE ORIGINAL STOP OR BETTER ON THE MIT. THIS
APPLIES TO STOP ORDERS AND MIT ORDERS PLACED BEFORE THE OPENING OF TRADING.
6. 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.
7. Stop Close Only
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.
8. 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.
9. 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.
10. 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 canceled. 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.)
PLEASE NOTE: WE WILL NOT ROUTINELY ACCEPT CANCEL/REPLACE OF AN OCO ORDER WITHIN
TO FIFTEEN MINUTES OF THE CLOSE OF TRADING. WE WILL ACCEPT CANCELING BOTH SIDES
DURING THIS PERIOD AND REPLACING WITH EITHER MOC OR MARKET ORDERS, BUT CANNOT GUARANTEE
AGAINST A DOUBLE FILL.
12. 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 cattle.
At this time, most exchanges do not report spread transactions on their quotation
feeds. A spread broker has great leeway to ensure he can obtain prices required
by limits. He cannot be held to any price differentials which seem to appear on
quotation equipment!
13. Other
As futures and options trading becomes more and more sophisticated, new strategies
and techniques may arise. Certain option orders called "spreads" may not look much
like traditional spreads. There may be two buys and no sells, the quantity may be
a ratio, it may include futures and options on the same order, and many more. If
you have any questions about this type of order, please let your manager know that
you may need help and he or she will be happy to assist you or to find someone who
can.