ORDER TYPES FOR ONLINE DAY TRADING FUTURES

For the online day trader, it is important to understand the types of orders that are available on the futures and options online trading platform. Products of CME Group, including the E-mini® S&P 500® contract, trade on the CME® Globex® online trading platform and products of IntercontinentalExchange® (ICE®) trade on the ICE online platform. The latter includes the U.S. regulated subsidiary, ICE Futures U.S.®, that trades the softs such as coffee, sugar and cotton.

Some order types, such as the market order, limit order and stop order, are simple enough to understand. But there has been a protection feature added to some of these orders to better mimic what had been manually done by the floor broker when executing in the traditional trading pit.

The protection feature is designed to prevent fills at extreme prices and would be used for a large quantity order say, for example, a market order to buy 400 E-mini S&P 500 contracts. In filling the order, offers will be sequentially lifted but only up to a maximum acceptable price that is predetermined based on a dynamic price range set by the exchange for that commodity market. Rather than continuing to fill the remainder of the order and accept even higher offer prices, the system will store the remaining, unfilled quantity as a limit order at the highest acceptable price. As more offers enter the system, prices may decline and the remainder of the order can then be filled.

The protection feature is needed in part because of the speed measured in milliseconds in which an order is typically filled electronically. This lightning-fast mechanism can cascade through a significant number of bids or offers before other players even have a chance to react. In contrast, the painfully slow, by comparison, procedure of filling large orders via open outcry did at least provide enough time for more bids and offers to enter the trading pit thereby reducing the likelihood of an extreme price movement.

The market-limit order and stop-limit, like the protection feature, also enable the day trader to avoid extreme fill prices on orders. However, in return, the likelihood of the order not being filled in its entirety rises.

Among order qualifiers, most traders are familiar with the GTC, FAK and FOK orders. CME Globex also allows a "Good-till-Date" (GTD) order. GTD orders remain active on the order book until they are completely executed, expire at the date specified by the trader, are cancelled, or when the instrument expires. Say that you want to place an open limit order to buy 10 E-mini S&P 500 contracts but don't want to trade during the release of upcoming employment data several days hence, expecting volatility to be severe. You might, then, place a GTD limit buy order to expire the day before the data's release. Neither Globex nor the ICE platform permit "Market-on-Open" orders (MOO), "Market-on-Close" orders (MOC) or "Market-if-Touched" orders (MIT).

During the trading session, these orders can be entered and, if not filled, modified or canceled. For more questions about order types and functionality, please Ask a Broker.