You may feel very annoyed when your order is not filled out, especially when you have a winning trade. Many times, it may happen that the traders are unable to file or execute their orders. What can you do to improve the probability of fast execution? There are some techniques and tricks that you can apply, and by making some adjustments, you can get your options order filled.
Try to imagine a scenario I am explaining herewith. You did the various types of analysis and found a good company worth investing your capital in. After carefully evaluating everything, you decided to go for it and bought the call options.
You did everything on your part, placed a limit order for your option contracts and waited for the market to open.
The next time market opens, and your predictions come true, you have a lot of chances to profit from your position. But upon checking, you found out that your order is not filled. How did this happen? When you were right about the market.
Stay with us till the end of this page, as we will cover the answer to the above situation. What happened, why is your order not filled, and what can you do to get it done?
How do brokers manage huge orders?
As the order takes place, the details go to the brokers, and they decide which order to be routed and who will fill and get executed.
Making of the market:
The broker sends the orders to the trading department, and as the humans complete bidding, it may take some time and delay the process of execution. If the broker has the authority and contracts available and fills all the orders internally, they may finish the whole procedure and divide their chunk of profit; it may be done faster.
In case the broker is unable to finish the trade, there is a provision he may send it to some third-party market maker, who will finish the trade on behalf of this broker and pay a fee to the broker for allowing him the opportunity to finish.
The order type:
If you have placed an order limit, there are chances of not getting the orders filled. Even if the contract price has not reached the desired limit, then there are also chances of the order not getting filled. Suppose the order gets filled, but it is not at the ideal price it should be. In such times the broker will take into consideration twice before deciding anything about its execution.
Obligations on the broker:
A trader, the SEC has your back; it has made some rules to protect traders. SEC mandates the brokers to execute the order at their best. If your order is not filled, there might not have been any agreeable price for the contract you are trading.
A gap in the chart:
Suppose all the traders have similar ideas and submit the orders at a very close range. The chart of the security map will show the gap. The gap means a discrepancy between the price stated in the chart and the actual price.
The effect of volume:
A low trading volume refrains the orders from being filled as the broker needs to match the buyer and seller. Huge multinational companies and big corporations have a higher volume than small companies. The small companies do not have many outstanding shares and thus have limited availability of the options contract to trade.
Generally, this happens because traders place a large order having a low volume. To avoid this type of situation, try to enter into small orders; some orders will get filled even though they have small volumes.
Make good use of the time:
Most traders trade just after the market opens or maybe before closing. If we talk about experienced traders and professionals, they place their trades at the busiest time of the day, as they have large orders.
The giant traders tend to take a break around lunch hours which can be the ideal time for placing the orders, as they have a high chance of getting filled.
Try to adjust the quantity of your contracts:
Most traders place their orders in the figures like 5, 10 or 20, which are multiple of five. Against this, some more traders place the same quantity of orders; this can work negatively in filling your order as brokers try to fill the same orders for many trades.
What you can do here is, adjust your quantity to some odd numbers such as 3, 7, 9, 13, etc. Here chances that the broker will fill your odds are high. Most institutional buyers and large investors trade in big sizes using this odd number technique, and the broker will likely bundle your contract.
From a Brokerage perspective, these orders are called "one-off". Suppose one trader has placed an order of 3 contracts, and if you place an order of 7, then both these will be bundled together to make 10 contracts.
Try to avoid round number pricing:
The contract price is considered the same as the order size. The round numbers price like 100, 200 and 25 are considered huge trades.
Try to add the prices such as Rs.23, 99, 64, etc.; in this case, the broker will try to match with someone having a closer price rather than keeping your order aside.
This technique of changing the price is the best way to get your orders filled and as per your desired quantity.
Optimum utilization of the order:
While placing the order, every trader wishes to justify their price. Suppose you placed an order at Rs. 8.50 and later you came to know that the order went through Rs. 10; this is not what you want.
By properly combining the limits and stop orders, traders can build a wide range and ensure they get their desired price, but this should not happen by paying more than needed.
Limiting the orders:
When the option contracts hit the predefined price or exceed that price at that time limit orders are executed.
Example: a trader wants to buy the call option contracts of XYZ ltd, whose last closing price was Rs.77. You are expecting the release from XYZ this week and wish to lock the profit you gain at Rs. 77, so you put a limit at Rs. 80 because you still have a thought in the mind that the price will hit Rs. 80 by the next week. Here you can submit a limit order of Rs. 80 which will stay as long as the
Applying the stop:
If you want your order to hit some price, which is the most profitable price for your position, you may apply the stop loss at that price. A stop order gets executed into the market as soon as it reaches the predetermined price.
For example, you wish to buy the Out-of-the-money put options contracts at Rs. 65, and you placed a stop order at Rs. 68. The other traders might also have kept the same price, looking at the market scenario, now after the market opens the contract may reach the price Rs. 70, in this case, your stop order will be counted as a market order.
So, the above example explains that the stop loss can be a good choice for getting into a position, but there is a risk attached. The risk is; you might get stuck with a higher price than your expectations. If we consider the above example, it may happen that the options opened at Rs. 80 or even higher. In this case, your order will get through the market, but you might need to pay a higher premium than expected.
Stop and limit together:
If you combine the stop and limits, you might get the best possible way to get your orders filled. Because the stop will make sure of getting orders through the market, and the limit will help you to avoid paying high premiums.
Let us understand with a hypothetical example here; a trader has set up a price limit of Rs. 60 and a limit price of Rs.80. These prices have created a range to get the orders filled anywhere between these prices. But you also need to be cautious that the orders having a price above Rs. 80 may not get filled.
Applying the stops and limits together can be useful when trading with high volumes. Applying these techniques increases the chances of getting your order filled; some will fill in the lower range while others may get the opportunity to fill at the upper range of the price.
Ultimate tips for getting your orders filled:
Options contracts are very volatile, and if you want to get them filled at your desired price, you have to practice patience. If you try hard to place market orders, you may lose the potential profit.
Planning makes everything possible:
As you decide on the trade, start planning on the trading strategies, think according to the other investors- what they would do, and what are the chances of getting your order filled as you wanted. If chances are less, try adjusting the price and quantity, or place the order at the off-peak time.
Stay determined, don't lose hope, and stay positive; not getting your order filled doesn't mean you have no other chance of making a profit. Use the methods and techniques described on this page and get your orders executed perfectly.