So, I had a few shares of MO shorted. Last night I made two OCO (one cancels other) orders on TOS. The orders were: Buy +13 MO stop at $78.50 Buy +13 MO stop at $81.00 They were both GTC orders, but I came home today and saw that the first order was filled at 9:30:17 even though MO never went low enough to hit $78.50. The order was filled with MO at $80.40. What's going on here? I thought the stop order changes into a market order when the price of the stock hits the stop.
If I'm reading your scenario correctly looks to me like your stop order did exactly what it was supposed to do. MO opens at 80.35 well above your buy stop price and the stop is elected becoming a market order. Buy stops are placed above the current price not below it.
The Limit Order The limit order is an order to buy or sell at a designated price. Limit Orders to buy are placed below the market while limit orders to sell are placed above the market. Since the market may never get high enough or low enough to trigger a limit order, a customer may miss the market if he uses a limit order. (Even though you may see the market touch a limit price several times, this does not guarantee or earn the customer a fill at that price. In most instances, the market must trade BETTER than the limit price for the customer to get a fill.) Stop Orders Stop orders can be used for three purposes: * to minimize a loss on a long or short position, * to protect a profit on an existing long or short position, or * to initiate a new long or short position. A buy stop order is placed above the market and a sell stop order is placed 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. 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. 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 cancelled. 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.)
You entered a buy stop order below the market price, of course it executed. That would be like entering a buy limit order above the market price. To be honest I am trying to come-up with a situation where anyone would ever want to use a buy stop.
I'm using them all day. That's the way I enter my positions (when I want long), just like a sell-stop when I want to go short. So obvious to me, am I missing something here? Ursa..
I ONLY enter with Buy Stop Limits and Sell Stop Limits. Why - I want to see a price level broken before I enter. Yes, the fill price is worse than if I just went in at the market, but if the price level is never broken, I don't want in the trade period. That's how I use them.
Yeh, brownsfan I can see using them with a limit attached but a straight buy stop would seem rather risky. What would happen if unexpected news hit the stock and trading was halted, when it reopened you could own stock way above your intended price. I guess I would rather just watch the stock or not own it.
Good point - always use a limit order as well. Just a buy stop is very risky as you could get a much worse fill. I just trade futures intraday, so that doesn't happen often, but I could see that easily in stocks.