How limit orders to sell are filled

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patientnvstr
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How limit orders to sell are filled

Post by patientnvstr » Tue Mar 05, 2019 12:42 pm

Hi all,

When placing limit order to sell, will the broker ensure that the order is filled at the best possible price or at any price that happens to satisfy the order? For example: Say the stock price is $50. A limit order to sell above $40 is placed before the market opens. The stock opens at $49. Will the broker ensure the order is filled for around $49 or will some random bid around $40 possibly be used to fill the order?

Thanks

senex
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Re: How limit orders to sell are filled

Post by senex » Tue Mar 05, 2019 3:23 pm

patientnvstr wrote:
Tue Mar 05, 2019 12:42 pm
When placing limit order to sell, will the broker ensure that the order is filled at the best possible price or at any price that happens to satisfy the order? For example: Say the stock price is $50. A limit order to sell above $40 is placed before the market opens. The stock opens at $49. Will the broker ensure the order is filled for around $49 or will some random bid around $40 possibly be used to fill the order?
During market hours (9:30 - 4:00 eastern) Regulation NMS requires that limit orders (and other non-derivatively-priced orders) be executed within the NBBO (national best bid, offer) inclusive. The NBBO is determined by taking the best bid across all exchanges and best offer across all exchanges. Thus, if the NBBO is 50.00 x 50.02, a limit order to sell at $40 cannot be filled for less than $50.00.

Outside of market hours Reg NMS is not active. Your broker has a "best execution" obligation, but it is much hazier than the clear-cut regulation, so for a retail investor it can be unwise to trade in certain ways outside of market hours.

Shallowpockets
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Re: How limit orders to sell are filled

Post by Shallowpockets » Tue Mar 05, 2019 3:30 pm

It might be helpful to know this, but in reality, when you place a limit order you have already decided that that price is what you want to sell the stock. On a rising price, as it rises, it could reach your limit price and be executed and then keep on going. I have seen it do so. I have sold at that limit that I decided was OK for me, but then it goes right through that price.
That's life.
Do you want some guarantee that your limit price will be executed at a better price than your limit?
This also works when the price reaches an apex of the day and it happens to be your limit price. I have seen my lot sold as it touched that price and then backed down.

Topic Author
patientnvstr
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Re: How limit orders to sell are filled

Post by patientnvstr » Tue Mar 05, 2019 4:08 pm

senex wrote:
Tue Mar 05, 2019 3:23 pm
Thus, if the NBBO is 50.00 x 50.02, a limit order to sell at $40 cannot be filled for less than $50.00.
This doesn't make sense to me. Wouldn't a limit order to sell at $40 be filled at any price above $40?

Topic Author
patientnvstr
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Re: How limit orders to sell are filled

Post by patientnvstr » Tue Mar 05, 2019 4:10 pm

Shallowpockets wrote:
Tue Mar 05, 2019 3:30 pm
It might be helpful to know this, but in reality, when you place a limit order you have already decided that that price is what you want to sell the stock. On a rising price, as it rises, it could reach your limit price and be executed and then keep on going. I have seen it do so. I have sold at that limit that I decided was OK for me, but then it goes right through that price.
That's life.
Do you want some guarantee that your limit price will be executed at a better price than your limit?
This also works when the price reaches an apex of the day and it happens to be your limit price. I have seen my lot sold as it touched that price and then backed down.
Specifically, I'm interested to use a limit order to limit potential decline when placing a sell order before the market opens, for example, in the scenario I mentioned where the limit ends up being much lower than the opening price.

senex
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Re: How limit orders to sell are filled

Post by senex » Tue Mar 05, 2019 4:19 pm

patientnvstr wrote:
Tue Mar 05, 2019 4:08 pm
This doesn't make sense to me. Wouldn't a limit order to sell at $40 be filled at any price above $40?
The execution price is constrained by both (a) your limit price AND (b) laws/regulations.
Sometimes the regulations are stricter than your limit price, sometimes not.
When they are stricter, they are stricter. Your broker can't choose to break the law because your limit price was lower.

My prior example is exactly how Reg NMS works during market hours.

senex
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Re: How limit orders to sell are filled

Post by senex » Tue Mar 05, 2019 4:27 pm

patientnvstr wrote:
Tue Mar 05, 2019 4:10 pm
Specifically, I'm interested to use a limit order to limit potential decline when placing a sell order before the market opens, for example, in the scenario I mentioned where the limit ends up being much lower than the opening price.
There are 8 permutations when placing a limit order before the open:
(a) is it eligible for pre-open trading? (yes or no)
(b) is it eligible to participate in the auction? (yes or no)
(c) if it hasn't been filled before/in the open, will it be live during market hours? (yes or no)

Your question cannot be answered until you figure out which order type/option you are using.

If (a) is true, you may get filled down to your limit price, even if your idea of "fair" price is way higher
If (b) is true, then if you get filled in the auction, you will trade at the official opening price
If (c) is true, then any fills in this period will be guaranteed to be within the NBBO

Based on what you're asking, I think you want to find your broker's order type (if they offer it) that has a=no, b=yes, c=yes. If your broker offers that order type, then you will be guaranteed to get a "fair" price, even if your limit price is "too low" (assuming you consider the auction process & nbbo to be fair, which is a good assumption).

Topic Author
patientnvstr
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Re: How limit orders to sell are filled

Post by patientnvstr » Tue Mar 05, 2019 4:50 pm

senex wrote:
Tue Mar 05, 2019 4:27 pm
patientnvstr wrote:
Tue Mar 05, 2019 4:10 pm
Specifically, I'm interested to use a limit order to limit potential decline when placing a sell order before the market opens, for example, in the scenario I mentioned where the limit ends up being much lower than the opening price.
There are 8 permutations when placing a limit order before the open:
(a) is it eligible for pre-open trading? (yes or no)
(b) is it eligible to participate in the auction? (yes or no)
(c) if it hasn't been filled before/in the open, will it be live during market hours? (yes or no)

Your question cannot be answered until you figure out which order type/option you are using.
In my case, I'm preparing for a lockup expiration. So an order placed before the open should not be eligible for pre-open trading. Auction I'm not familiar with. It should be live during market hours though.

senex
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Re: How limit orders to sell are filled

Post by senex » Tue Mar 05, 2019 5:22 pm

patientnvstr wrote:
Tue Mar 05, 2019 4:50 pm
In my case, I'm preparing for a lockup expiration. So an order placed before the open should not be eligible for pre-open trading. Auction I'm not familiar with. It should be live during market hours though.
Your broker probably supports such an order type (only live during market hours). That sounds like what you want.

Topic Author
patientnvstr
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Re: How limit orders to sell are filled

Post by patientnvstr » Tue Mar 05, 2019 5:59 pm

senex wrote:
Tue Mar 05, 2019 5:22 pm
patientnvstr wrote:
Tue Mar 05, 2019 4:50 pm
In my case, I'm preparing for a lockup expiration. So an order placed before the open should not be eligible for pre-open trading. Auction I'm not familiar with. It should be live during market hours though.
Your broker probably supports such an order type (only live during market hours). That sounds like what you want.
Thanks, in which case setting a low limit won't affect my chance of getting a lower selling price? That's pretty much my concern - that the order will be fulfilled for less than the open price because I happened to set a lower limit.

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Phineas J. Whoopee
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Re: How limit orders to sell are filled

Post by Phineas J. Whoopee » Wed Mar 06, 2019 4:09 pm

The broker is supposed to get you the best available price, where best is from your transactional perspective. Liquidity is much better during market hours.

There are credible allegations it doesn't always happen.

You should never see a transaction above your buy limit, bid, or below your sell limit, ask. That doesn't necessarily mean your broker got you the best available at the moment your limit is reached, even though U.S. regulations say they're required to. It's hard to prove in court it didn't happen, plus most brokers require your agreement to arbitration, not litigation.

The less you transact the less of this particular risk you take.

PJW

Shallowpockets
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Re: How limit orders to sell are filled

Post by Shallowpockets » Wed Mar 06, 2019 5:17 pm

I would never set a price before opening. You need to see how the market goes. Never place a market order either. These are basics.

livesoft
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Re: How limit orders to sell are filled

Post by livesoft » Wed Mar 06, 2019 5:21 pm

Discussion of the opening cross is contained in this thread on broker executions:
viewtopic.php?t=165732

Generally for a non-small volume security such as many index ETFs, submitting a market order before the market opens will get a fair price at the opening cross. That is similar to submitting a mutual fund order before the market close where one expects to get an unknown fair price. It has been written though that there is better price discovery during the day than before the market opens. I attribute that to simply just that many places of work are not open before the market opens.

It is basically OK to submit a market order before the market opens for the things that you would want to sell or own.
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SantaClaraSurfer
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Re: How limit orders to sell are filled

Post by SantaClaraSurfer » Mon Jun 29, 2020 6:43 pm

Bumping this to ask a question based on today's experience. I don't see an answer to this in the wiki or above.

Selling 10 shares of an individual stock during market hours via my wife's brokerage. (Numbers fake just for example.)
Share price was trending upwards at the end of the day but it doesn't look likely to hit our limit sell order of $93.
We would prefer to sell today, and even at a lower price than $93 this would still be an improvement over the opening price.
The Stocks App on my phone lists the share price at $90 with 15 minutes to market close.
We cancel the previous Limit Order and put in a new Limit sell order of $87 for our shares figuring the order will execute right away and we will get "$87 or better."
The shares sell in 3 separate transactions (with fractional shares) all for $87 exactly 5 minutes before close.
Stock closes at $91 and when I check my brokerage (not the one we sold through) for the share price history today it is steadily upwards the last 15 minutes of trading (with the highest volume of the day) from $90 to $91.

1. Why did our shares sell for $87 and not $90 or higher? It appears that our experience echoes the concern of the OP, our shares appear to have sold for our lowest Limit Order price and not for the price I was seeing on the Apple Stocks App on my iphone.
2. Is there a frequently a large difference between the Apple Stocks App price and the actual price that my wife's brokerage can get? ie. Could the app have been wrong? Why would my brokerage's chart of the trading day match the data from the App in that case?
3. Basically shouldn't ANY sale in that time frame have been for the market price, even if the Limit Sell Order was for a lower price? Is that how a Limit Sell Order should work?

These are not the actual prices or number of shares, but they do reflect the situation accurately.

The reason we put a limit sell order in was to create a floor in the case the price suddenly dipped a large amount in the time it took us to cancel the first limit sell order and put a new order in and have it execute. The shares started the day at a much lower price so we had good reason to be afraid of volatility.

At the end of the day, we still locked in a improvement and got a better price than market open. No tragedy here and no regrets.

Just want to understand.

livesoft
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Re: How limit orders to sell are filled

Post by livesoft » Mon Jun 29, 2020 6:53 pm

Did you look at a chart that showed the lowest AND highest prices (that is, the RANGE of prices) that transactions occurred at during those last 15 minutes? If you only looked at a chart that showed one price per minute or second, then you might not see any trades for $86 or $87 or $88 if there were other trades in that same time interval.
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SantaClaraSurfer
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Re: How limit orders to sell are filled

Post by SantaClaraSurfer » Mon Jun 29, 2020 7:10 pm

livesoft wrote:
Mon Jun 29, 2020 6:53 pm
Did you look at a chart that showed the lowest AND highest prices (that is, the RANGE of prices) that transactions occurred at during those last 15 minutes? If you only looked at a chart that showed one price per minute or second, then you might not see any trades for $86 or $87 or $88 if there were other trades in that same time interval.
I did not, I will see if I can create that view at my brokerage or on Yahoo?

I am guessing that it will show the price as being in the range if that is the case.

Thank you.

mortfree
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Re: How limit orders to sell are filled

Post by mortfree » Mon Jun 29, 2020 7:12 pm

Was there an option to select “all or none” when specifying the shares?

Did you get charged a transaction fee to sell?

You probably should have just used the market order

SantaClaraSurfer
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Re: How limit orders to sell are filled

Post by SantaClaraSurfer » Mon Jun 29, 2020 7:35 pm

livesoft wrote:
Mon Jun 29, 2020 6:53 pm
Did you look at a chart that showed the lowest AND highest prices (that is, the RANGE of prices) that transactions occurred at during those last 15 minutes? If you only looked at a chart that showed one price per minute or second, then you might not see any trades for $86 or $87 or $88 if there were other trades in that same time interval.
Yep, did a "Candlestick" chart with "5 Minute' increments and our Sale Price shows as in range.

So, again, thanks, have to see now that this worked as a Limit Order per expectations.

Looks like super high trading volume impacted the range, but ours fell within the candlestick so we can have no complaints.

SantaClaraSurfer
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Re: How limit orders to sell are filled

Post by SantaClaraSurfer » Mon Jun 29, 2020 7:49 pm

mortfree wrote:
Mon Jun 29, 2020 7:12 pm
Did you get charged a transaction fee to sell?

You probably should have just used the market order
Fee was minimal, and there was no issue with structuring the shares for the order.

I'm actually fine now that I understand that our Limit Sale was within range.

That range was still in the upper fifth for the day, so we were correct to wait via setting a higher limit order earlier in the day which forced us to sell later. If we had put our revised limit order in within the very last five minutes we would have had a chance of getting the 80th-100th percentile, but that's only clear in hindsight, it could easily have been less.

Not actually trying to time this, just trying, within our preferred day, to properly use a limit order.

Thanks for the reply!

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