Additional Information Regarding the Use of Stop Orders

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. 

Investors may use stop sell orders to help protect a profit position in the event the price of a stock declines or to limit a loss. In addition, investors with a short position may use stop buy orders to help limit losses in the event of price increases. However, because stop orders, once triggered, become market orders, investors immediately face the same risks inherent with market orders – particularly during volatile market conditions when orders may be executed at prices materially above or below expected prices.
While stop orders may be a useful tool for investors to help monitor the price of their positions, stop orders are not without potential risks.  If you choose to trade using stop orders, please keep the following information in mind:
·         Stop prices are not guaranteed execution prices. A “stop order” becomes a “market order” when the “stop price” is reached and the resulting order is required to be executed fully and promptly at the current market price. Therefore, the price at which a stop order ultimately is executed may be very different from the investor’s “stop price.” Accordingly, while a customer may receive a prompt execution of a stop order that becomes a market order, during volatile market conditions, the execution price may be significantly different from the stop price, if the market is moving rapidly.
·         Stop orders may be triggered by a short-lived, dramatic price change. During periods of volatile market conditions, the price of a stock can move significantly in a short period of time and trigger an execution of a stop order (and the stock may later resume trading at its prior price level). Investors should understand that if their stop order is triggered under these circumstances, their order may be filled at an undesirable price, and the price may subsequently stabilize during the same trading day.
·         Sell stop orders may exacerbate price declines during times of extreme volatility. The activation of sell stop orders may add downward price pressure on a security. If triggered during a precipitous price decline, a sell stop order also is more likely to result in an execution well below the stop price.
·         Placing a “limit price” on a stop order may help manage some of these risks. A stop order with a “limit price” (a “stop limit” order) becomes a “limit order” when the stock reaches or exceeds the “stop price.” A “limit order” is an order to buy or sell a security for an amount no worse than a specific price (i.e., the “limit price”). By using a stop limit order instead of a regular stop order, a customer will receive additional certainty with respect to the price the customer receives for the stock. However, investors also should be aware that, because a sell order cannot be filled at a price that is lower (or a buy order for a price that is higher) than the limit price selected, there is the possibility that the order will not be filled at all. Customers should consider using limit orders in cases where they prioritize achieving a desired target price more than receiving an immediate execution irrespective of price.
·         The risks inherent in stop orders may be higher during illiquid market hours or around the open and close when markets may be more volatile. This may be of heightened importance for illiquid stocks, which may become even harder to sell at the then current price level and may experience added price dislocation during times of extraordinary market volatility. Customers should consider restricting the time of day during which a stop order may be triggered to prevent stop orders from activating during illiquid market hours or around the open and close when markets may be more volatile, and consider using other order types during these periods.
·         In light of the risks inherent in using stop orders, customers should carefully consider using other order types that may also be consistent with their trading needs.

Non-Guaranteed Combination Orders

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:

  • Method 1 - Users can select the Non-Guaranteed attribute in the Misc. section on the Order Ticket for a particular order
  • Method 2 - Users can add the Non-Guaranteed column to the Order Management section of the TWS



  • Non-Guaranteed combination orders are not available for Financial Advisor allocation orders


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).

Current markets

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
Pay 224

Based on the current markets, the order would appear to be executable.

  • A buy of 200 shares of AAPL are routed with a 250.30 limit. Only 100 execute.
  • A sell of 200 shares of MSFT are routed with a 26.30 limit. No execution is received as the market moves to 26.29 bid.

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.

WebTrader: Viewing Option Chains

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

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