Suppose I am short a regular put option on a stock in the US option markets. Today it is worth $1,00, and I have a SMART limit buy order at IB at $0.90 in the market, with an expiry date for some day next week. Now, suppose after market close, but before the open the next day, the company releases some fantastic news, making the put option worth way less than my $0.90 limit buy, maybe around $0,50. What will happen to my limit buy order which is still live from yesterday and until next week? Will it become effectively a market order buying at the ask after market open, where the spread is wide open at, say, $0.35 bid - $0.65 ask because of the opening turmoil (while in regular markets the bid ask spread might be a few cents only)? Or is there some kind of opening auction process, where there is a chance my limit order will be executed (hopefully) around the mid-price of $0.50, or whatever the opening auction price is? I hope the above is understandable. What I am trying to avoid is paying up insane bid-ask spread at open when there is an opening price gap on my long term limit orders. PS same question for regular equity limit order on NYSE/NASDAQ. Will a regular SMART limit order participate in pre or after market, or will it participate in the opening auction, or will it become a regular marketable limit order after a price gap in the limit order's favor?
If you want your order to participate in the opening auction you'll have to submit it as an appropriate order type (MOO: market on open, LOO: limit on open). Any other order type will not participate in the opening auction. For example: the order types which IB supports for the CBOE options exchange can be found on this page: https://www.interactivebrokers.com/en/index.php?f=2222&exch=cboe&showcategories=OPTGRP Click on the section which says "Order Types - Click to Expand"
I see, thanks. I do see in the picture in the bottom though, there's an option to select "ignore open auction". Implying open auctions are not ignored by default. I guess I'll have to dig deeper once I have an account. https://www.interactivebrokers.com/en/trading/orders/loo.php
These 2 order types are for orders entered during the pre-opening. For limit orders GTC entered during a previous day, they are participating in the opening auction process. For the OP example, his order would gets filled at the opening price.
@trade4succes, why don't you just do the obvious: simply just cancel (or modify) the order! You can cancel/modify an order anytime, and the brokerage system should execute it immediately...