Orders with stop-price triggers -- risks of unpredictability on the open?

Discussion in 'Options' started by d0rian, May 28, 2015.

  1. d0rian

    d0rian

    I've just begun expanding my understanding of order types past the standard market- / limit- / stop- orders (mostly since IB offers about 20x as many types as my prev discount brokerage), and want to make sure I'm not about to expose myself to risks b/c of unusual bid/ask activity on market open.

    Example: SP is $25 and I create a Market-if-Touched BUY order for 1,000 shares at $24.50. I often notice that when I check pre-market bids/asks they're all over the map...sometimes 25% higher or lower than what they end up actually being on open. I've been told to just ignore pre-market #'s, since they're not "real"...but that's kind of what I want to make sure isn't going to screw me here. Is there any risk that the irregularity of the pre-market activity results in a wacky first few seconds of trading, whereby some abnormally high or low trade actually gets executed or otherwise 'makes it through'?

    In a nutshell, I'm basically trying to assess the 'safety' of these order types to make sure I don't get some terrible execution price on a large trade due to weird opening activity on a stock that has only modest daily volume (~300K). All it would take is one irregularly-priced trade getting executed to trip a 5-figure order on my part, so I'm being cautious. Am I thinking about this correctly, and are there other safeguards I should place? Only ones I could think of are:
    i) Using a Limit-if-Touched or some other Limit- order type...won't go into detail, but I think I'd rather use a Market type for various reasons.
    ii) I think IB will let me activate an order like this only during certain hours? So maybe I instruct it to only be active from 9:33am to 4:00pm...?

    Thanks, hope I was clear enough above; a little new to these and trying to learn.