U.S. equity markets occasionally experience periods of extraordinary volatility and price dislocation. Sometimes these occurrences are prolonged and at other times they are of very short duration. Stop orders may play a role in contributing to downward price pressure and market volatility and may result in executions at prices very far from the trigger price.
A combination order is a special type of order that is constructed of multiple separate positions, or ‘legs’, but executed as a single transaction. The legs of the combination may be comprised of the same position type (e.g. stock vs. stock, option vs. option or SSF vs. SSF) or different position types (e.g. stock vs. option, SSF vs. option or EFP). It’s important to note that many combination order types, while submitted via the IB trading platform as a combination, are not native to (i.e., supported by) the exchanges and therefore may not be guaranteed by IB. Accordingly, IB’s policy is to guarantee only Smart-Routed U.S. stock vs. option and option vs. option combination orders.
As combination orders which are not guaranteed are exposed to the risk of partial execution, both in terms of the quantity of legs and their balance, IB requires account holders to acknowledge the 'Non-Guaranteed' attribute at the point of order entry. There are two methods for setting this attribute:
The risk of such 'Non-Guaranteed' orders is illustrated through the example below:
Assume the following quotes for a Stock vs. Stock combination order to purchase shares of Microsoft (MSFT) and sell shares of Appl (AAPL).
MSFT - 26.30 bid, 26.31 offer
AAPL - 250.25 bid, 250.30 offer
A generic combination is created to buy 1 share AAPL and sell 1 share MSFT, the implied quote would be 223.94 bid, 224 offer.
The following order is entered:
Buy 200 AAPL, Sell 200 MSFT
Based on the current markets, the order would appear to be executable.
With a Non-Guaranteed combination, the 100 shares of AAPL would be placed in the client account, even though no MSFT shares were executed. The remainder of the combination order will continue to work until executed in its entirety or until it is canceled.
How to view option chains in WebTrader
For a brief introduction to the WebTrader platform please click here
For a brief video on basic order entry using WebTrader please click here
For a brief video on how to access market depth information using WebTrader please click here
For a brief video on how to customize the WebTrader please click here
How to create option spread strategies using OptionTrader
How to enter option orders using OptionTrader.