Options Take Profit/Stop Loss Order Is Available
What is Take Profit/Stop Loss Order?
Take Profit/Stop Loss Order is an order type used to exit an existing position.
- A stop-loss order is designed to prevent further losses on the existing position once the option price reaches a specified price and is filled as a market order.
Note: it is possible that the order may be filled at a price much different from the pre-determined price, especially in a volatile market.
- A take-profit order is used to protect profit on an existing position once the option price reaches a specified price. Different from the stop-loss order, a take profit order is filled as a limit order when it is triggered.
Note: even though the option price may have hit the target, it is possible that the order is not filled if the trend does not last long enough.
How to Use Take Profit/Stop Loss Order on Options Trading?
There are two types of group orders for selection in options trading:
- Limit + Profit/Stop Loss Order
- Market + Profit/Stop Loss Order
The Limit or Market Order is the order used to open your position.
· A limit order is an order to trade at a specified price or better:
✧ For a buyer, the limit price is set as bid quote.
✧ For a seller, the limit price is set as ask quote.
· A market order is an order to buy or sell a stock at the best available price.
To sum up, Take Profit/Stop Loss Orders help traders to close their position at a pre-determined price. A target price should be set in both Take Profit Orders and Stop Loss Orders. When one of them is filled, the other is automatically canceled.
Disclaimer Regarding Buy/Sell Limit, Stop Loss, Sell Stop, and Stop Limit Orders:
Due to fast-moving markets, market volatility, and illiquid markets, take profit and stop loss orders may not execute in it's entirety or at all. In these instances, the stock price may skip over the set price and leave the order unexecuted or may execute at prices which are substantially different than expected.
