Stop Orders

Discussion in 'Order Execution' started by andiamo, Jul 16, 2005.

  1. andiamo


    A question about stop market orders...

    What happens to a stop market order if, when it is submitted, the market has already exceeded the stop price?

    Here's an example of what I mean:

    Let's say the current market is 9x10 (9 bid, 10 ask). I'm long from a price of 10 and I submit a sell stop order for a price of 8. Now, let's assume that by the time my order hits the exchange, the current market is 6x7 (6 bid, 7 ask). The market is already trading below my stop price so what happens to my sell stop? Does it get executed as a regular sell market order (filled at the best bid, 6) or does the order get rejected? I'm specifically talking about orders on the CME.

  2. andiamo


    Can anyone help me out here?
  3. if it's a stop (market) it is executed ,
    last price is below your stop, same happens if you mistakenly send a sell stop that is above the market , you will sell at market price
  4. It gets filled as a market order.
  5. alanm


    Also, the timing and exact triggering mechanism may depend on exactly where the stop resides, and how that platform triggers stops. This matters if it's a slow-trading instrument. If stops are triggered by prints, the order may not go live until the next print (if it's at or above/below your buy/sell stop price). If it's triggered by the bid/ask, the quote may have to change to trigger it.

    If I recall correctly, IB's old double bid/ask method would have required two quote changes to trigger it. I also think I recall their platform telling you if your stop price was already marketable, though.
  6. andiamo


    Thanks for the responses!
  7. Actually, stops on listed stocks are triggered off the last price. Sell stops on OTC are triggered of the bid price. Buy stops on the OTC are triggered off the ask price.

    If a stop is already marketable before it hits the exchange, it is normally rejected. The market must be above the sell stop price for it to be a good order. This is not like making a mistake with a limit order. There is an assumption to all limit orders of your price...or better. This is not the case with stop orders.