Option Limit Orders

Option Limit Orders

An option limit order is an order to buy an option at no more than a specific price, or to sell an option at no less than a specific price (called “or better” for either direction). This gives an option trader control over the price at which the trade is executed. However, it is important to remember, the order may never be executed, or filled, depending on the market for that particular option.

A buy limit order can only be executed at the limit price or lower. For example, if an option trader places a limit order to buy 10 call or put contracts at $1.25, they can be filled at $1.25 or any price lower. If the option reaches $1.26, the trader will not get a fill. If it reaches $1.25 but not any lower, there is a 50/50 chance the order will be filled.

A sell limit order is the reverse of a buy limit order; it can only be executed at the limit price or higher.

There are other constraints a trader can use like fill or kill (FOK) and all or none (AON) but NextOptions.com does not use them and is up to each individual option trader to use them or not.

We always recommend option traders always enter our recommendations with a limit order. By using limit orders, this will ensure you a satisfactory entry. And, if none or only some of our trades are filled – then it’s probably for the best because experience has taught us not to chase overpriced options.