How to best execute a large order for a thinly traded stock

Discussion in 'Order Execution' started by cunparis, Jun 18, 2008.

  1. I'd like to know the best way to execute a large order for a thinly traded stock. Since I'm at work during the day, I'd like for the entry and exit to be at either market open or close.

    Let's say open for this example because that's what's easier for me (I can do it in the evening or morning before work).

    I think think of 3 possiblities:

    1 - Use market on open
    2 - Use IB's scale feature to scale the order
    3 - Use a limit order and put the limit at something like yesterday's close or today's open

    Does any one have an advantage? My main concern is driving the price up (or down) with my order.

    I'm currently doing the #1 (MOO) but I'm trading 100 lot shares to start out.

    Thanks for sharing your opinions and experiences.
     
  2. Euler

    Euler

    In my opinion, the open might be the worst time for your order if it's at market, since you have no idea what price you'll get.

    If that IB order works well, that might be the way to go. That sort of scaling sounds similar to what institutional brokerages offer their clients with VWAP-type algorithms assisting, and it's claimed and supposedly verified that it works well.
     
  3. kubilai

    kubilai

    What % of the average daily volume are you trying to buy/sell?

    If it's 0.2%, MOO, MOC, limit order mid day would all be fine.

    If it's 1-2%, can try MOO+MOC+random orders during the day.

    If it's >5%, I can't help.

    The problem with MOO and MOC is you don't get any feedback on your slippage. You can test your slippage using a marketable limit order during the day.
     
  4. dcvtss

    dcvtss

  5. ntmf

    ntmf

    Well, I think the best way to do is to post IB. You can get the best price and you don't need to pay for the removing liquidity fee

    If your shares size is really huge for a single stock, like millions of shares, you can try to contact dealers or banks to buy your shares as a "block"
     
    paulinus likes this.