Wouldn’t it be great if we could always place a conditional order? “I’ll take the spaghetti if it comes with sausage imported from Italy.” Or, “I’ll buy these shoes if they have an orthotic built in.”
Savvy traders in the stock market like to place conditional orders with specific criteria, such as a stop order (an order to buy or sell a stock once it reaches a specified price), a limit order (an order to buy or sell a stock at a specific price or better), or a stop limit order (like...a stock currently trades at $40 and you’d like to sell if it goes below $39, but only if it can be sold for $38 or more). In other words, in a conditional order, traders state certain prices that a stock has to reach before they'll buy or sell, not just the first available price. They might also state that the stock has to reach a certain volume, or be available at a price for a certain length of time, or hit a percent change.
Another type of conditional order is called one-cancels-other. Here the trader can place several conditional orders, and when one hits the specified criteria, the order executes and automatically cancels all the other orders. An order-sends-order is kind of the opposite; when one order is executed, it triggers more orders to be placed.
Let’s say Tracy Trader has been following a certain stock and believes it's about to go down in price. She places a conditional order to buy a put option (predicting the price will go down) once the stock hits $20. Her conditional order would be to buy the put option when the underlying stock goes down to $20.
Related or Semi-related Video
Finance: What are At-the-Close Order and...24 Views
Finance a la shmoop.. What are at the close order and at the opening orders
Well simply put they're a way of buying and selling stocks and bonds and [Shmoop video on PC monitor]
they're really a hybrid form of a limit order only instead of limiting the order
of a hundred shares of Mickey D's at 45 bucks or better the "limit"
is time-based that is it is placed a minute or less from the close of the
market like 3:59 p.m. New York time or the open of the market like 9:31 a.m. New
York time got it so why would someone do this kind of limit order well if a [Man discussing limit order]
company that day before had printed what looked like a really good quarter but
upon deep inspection the investor who owned the shares thought otherwise and [Man inspecting company folder]
you know wanted to dump them well then that investor would want to take
advantage of a high opening print and just sell it whatever the price was a
minute or two after the open making the bet that the stock would then trade down
after bigger smarter better analysis was published on the stock itself and then
everyone else went to dump it - so what about an at the close order well kind
of inverse of the same thing here a company's quarter will be announced at [4:28pm shown on digital clock]
4:30 p.m. New York time tons of excitement leading up to it so
"everyone" wants to be long the stock ahead of earnings but you think
earnings will disappoint like you know buy the rumor sell the actual news kind
of vibe so you want to hold the stock until the last minute that day and then
you just give the guidance to sell the stock that last minute of trading or at [Investor sells stock to market]
the close and you're out and now we have arrived at the close of this video... Adios! [Man waving on stage]
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