Buy ETF & sell mutual fund close together in time?

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need403bhelp
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Buy ETF & sell mutual fund close together in time?

Post by need403bhelp »

Dear All:

Due to account constraints, I will soon be doing an "exchange" of sorts purchasing VOO in TD Ameritrade while selling some Fidelity mutual funds in a Fidelity account. I'd like to have these trades executed as close to each other temporally as possible. This will, also, be my very first purchase of an ETF ever, so I'm not 100% clear on the mechanics (type of purchase order, etc.). Any advice re a way to do this to make ETF & mutual fund transactions happen close together in time would be much appreciated. I'm assuming that I'd put in my order to sell Fidelity mutual funds during the day so that it happens @ NAV after market close, what time should the ETF purchase take place? Will I be able to schedule it? Also, what kind of purchase order should I use to buy the ETF?

Sorry for the basic ETF questions.

Thanks!
annu
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Re: Buy ETF & sell mutual fund close together in time?

Post by annu »

ETF purchase can happen like individual stocks, right away if you pick MArket order as order type. For VOO since it is very popular you should not see huge variation on a normal day, but if market is very volatile there could be benefit in doing limit order.

Also I am not sure what your constraints are, but maybe dont try to convert MF to ETF, maybe do new purchases into ETF.
Unless you have money in account, even if you put in order to sell Mutual Fund, since it will not be sold until end of day, you will need to have money to buy ETF at the same time.
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need403bhelp
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Re: Buy ETF & sell mutual fund close together in time?

Post by need403bhelp »

annu wrote: Fri Oct 30, 2020 10:17 pm ETF purchase can happen like individual stocks, right away if you pick MArket order as order type. For VOO since it is very popular you should not see huge variation on a normal day, but if market is very volatile there could be benefit in doing limit order.

Also I am not sure what your constraints are, but maybe dont try to convert MF to ETF, maybe do new purchases into ETF.
Unless you have money in account, even if you put in order to sell Mutual Fund, since it will not be sold until end of day, you will need to have money to buy ETF at the same time.
Thanks.

To be clear, there are two separate accounts:

Account A at TD Ameritrade, I will have let's say $10,000 in cash. This is the money I'd like to use to purchase VOO.

Account B, for simplicity let's say at Vanguard also let's say invested in VFIAX, roughly $10,000 worth. I'd like to sell it so that the sale happens roughly around the same time as the purchase of VOO in account A.

Once I schedule the sale of VFIAX in account B, I know that'll happen @ end of trading.

Can I somehow schedule the purchase in account A to happen close to the sale in account B? If so, would I schedule a market order at 4:30 pm EST? 4:45 pm EST? Or do I really have to purchase it live. Just trying to understand the logistics for this hypothetical scenario, which is close to what I actually will need to do.

Thanks!

EDIT: again, just to be clear, I've never (well, except bonus type deals where I don't care about purchase and am usually purchasing $1 worth of stock or the like) purchased any individual stock nor ETF, only mutual funds, so my experience with market and limit orders is zero.
000
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Re: Buy ETF & sell mutual fund close together in time?

Post by 000 »

If TD Ameritrade supports a market-on-close order, you can use that to buy the ETF on the same day the mutual fund sale is processed. Of course, you will likely pay a little more in the spread with a market-on-close order.

Otherwise, you can login to your broker at 3:45, hit refresh for ~10 minutes, hope the internet doesn't go down, etc. then do the trade.

Maybe TDA supports a timed trade, I don't know (I don't use TDA), but I doubt it.

Good luck
bradinsky
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Re: Buy ETF & sell mutual fund close together in time?

Post by bradinsky »

OP,
Mutual fund trades settle in one (1) day & stock & ETF trades settle in two (2) days.
livesoft
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Re: Buy ETF & sell mutual fund close together in time?

Post by livesoft »

There is really no real need nor necessity to have these trades happen close together in time. Close enough say within hours or a day or two would be fine.

But the OP could submit the ETF within a minute or a few seconds before the market close. I would recommend earlier since they are unfamiliar with ETFs. They could submit an order to buy 1 or 2 shares earlier in the day to see how things work, then later in the day buy the rest of the shares. Or they could do something else including buying the next day. Why would it even matter anyways?
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MotoTrojan
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Re: Buy ETF & sell mutual fund close together in time?

Post by MotoTrojan »

bradinsky wrote: Sat Oct 31, 2020 7:18 am OP,
Mutual fund trades settle in one (1) day & stock & ETF trades settle in two (2) days.
Settling has nothing to do with when the price is locked, so assuming the OP has the cash-buffer to cover the waiting period for the mutual fund, this is irrelevant.

OP, simply schedule the mutual fund sale in advance and then be ready to place the ETF order via a market order (totally safe for VOO, no need for limits) as close to 4pm EST on the day the MF sale is scheduled as you are comfortable with. 3:55pm should be close enough, but if you are quick with the draw feel free to press go at 3:59. You can use a similar ETF to the MF as a proxy to estimate how much the proceeds will be if you want to get as close as possible.
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Re: Buy ETF & sell mutual fund close together in time?

Post by need403bhelp »

MotoTrojan wrote: Sat Oct 31, 2020 7:44 am
bradinsky wrote: Sat Oct 31, 2020 7:18 am OP,
Mutual fund trades settle in one (1) day & stock & ETF trades settle in two (2) days.
Settling has nothing to do with when the price is locked, so assuming the OP has the cash-buffer to cover the waiting period for the mutual fund, this is irrelevant.

OP, simply schedule the mutual fund sale in advance and then be ready to place the ETF order via a market order (totally safe for VOO, no need for limits) as close to 4pm EST on the day the MF sale is scheduled as you are comfortable with. 3:55pm should be close enough, but if you are quick with the draw feel free to press go at 3:59. You can use a similar ETF to the MF as a proxy to estimate how much the proceeds will be if you want to get as close as possible.
Thanks, everyone.

I appreciate your comments and support.

I did play around with the TDA website today to see how to purchase an ETF, and may end up doing livesoft's suggestion of making 1-2 small purchases the morning of the trade day to get a feel for the platform.

Thanks!
UpperNwGuy
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Re: Buy ETF & sell mutual fund close together in time?

Post by UpperNwGuy »

I'm still trying to figure out what is the problem that OP is trying to solve. Why is this timing issue so important?
bling
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Re: Buy ETF & sell mutual fund close together in time?

Post by bling »

you can place a "market on close" order, which will do exactly what what you think it does.

however, TDA doesn't have fractional shares, so you'll probably want to do it manually minutes before so you know exactly what you're paying.
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Re: Buy ETF & sell mutual fund close together in time?

Post by need403bhelp »

UpperNwGuy wrote: Sat Oct 31, 2020 10:01 pm I'm still trying to figure out what is the problem that OP is trying to solve. Why is this timing issue so important?
Money is coming out of an account where it cannot be transferred in kind and I am adjusting AA in uninvolved accounts to make sure I have no time out of market. This is the step where I will be moving these funds back to equities and re-adjusting rest of accounts (all mutual funds) back to original positions. No problems unless there is a lot of volatility with respect to election outcomes, etc. Thanks!
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Re: Buy ETF & sell mutual fund close together in time?

Post by need403bhelp »

bling wrote: Sat Oct 31, 2020 10:13 pm you can place a "market on close" order, which will do exactly what what you think it does.

however, TDA doesn't have fractional shares, so you'll probably want to do it manually minutes before so you know exactly what you're paying.
I a new to TDA platform, but didn't see an option to do a "market on close" order.

Do I need to use the thinkorswim platform to execute such an order?

Is the ask-bid spread less favorable for a market on close order vs a regular "market" order, or does it not matter too much for VOO?

Thanks!

EDIT: There is a "time-in-force" option, for which I can choose "day" or "market-on-close." This is separate from the order type option where I can choose "limit," "market," etc. Would a "market-on-close" order simply have the type "market" and "time-in-force" of "market-on-close," or is this something different? Thanks!
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Re: Buy ETF & sell mutual fund close together in time?

Post by bling »

need403bhelp wrote: Sun Nov 01, 2020 11:48 am EDIT: There is a "time-in-force" option, for which I can choose "day" or "market-on-close." This is separate from the order type option where I can choose "limit," "market," etc. Would a "market-on-close" order simply have the type "market" and "time-in-force" of "market-on-close," or is this something different? Thanks!
yes, market order + market-on-close time-in-force.

but to reiterate, i do not recommend that you do this unless you understand the consequences. let's say you put in for 100 shares, and price moves up 2%, if you don't have enough money you'll end up buying on margin.
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Re: Buy ETF & sell mutual fund close together in time?

Post by need403bhelp »

bling wrote: Sun Nov 01, 2020 12:01 pm
need403bhelp wrote: Sun Nov 01, 2020 11:48 am EDIT: There is a "time-in-force" option, for which I can choose "day" or "market-on-close." This is separate from the order type option where I can choose "limit," "market," etc. Would a "market-on-close" order simply have the type "market" and "time-in-force" of "market-on-close," or is this something different? Thanks!
yes, market order + market-on-close time-in-force.

but to reiterate, i do not recommend that you do this unless you understand the consequences. let's say you put in for 100 shares, and price moves up 2%, if you don't have enough money you'll end up buying on margin.
I see. I don't have margin enabled on my account. So what will happen?
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Re: Buy ETF & sell mutual fund close together in time?

Post by bling »

need403bhelp wrote: Sun Nov 01, 2020 1:16 pm
bling wrote: Sun Nov 01, 2020 12:01 pm
need403bhelp wrote: Sun Nov 01, 2020 11:48 am EDIT: There is a "time-in-force" option, for which I can choose "day" or "market-on-close." This is separate from the order type option where I can choose "limit," "market," etc. Would a "market-on-close" order simply have the type "market" and "time-in-force" of "market-on-close," or is this something different? Thanks!
yes, market order + market-on-close time-in-force.

but to reiterate, i do not recommend that you do this unless you understand the consequences. let's say you put in for 100 shares, and price moves up 2%, if you don't have enough money you'll end up buying on margin.
I see. I don't have margin enabled on my account. So what will happen?
call them and ask. it might be cancelled. or your balance could go negative and you'll get a "margin call" to deposit more before the trade settles in T+2.

or...avoid this and just do it manually. it takes 5 seconds to login and another 5 seconds to place the trade. they even have a calculator right there on the website to calculate the correct # of shares.
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Re: Buy ETF & sell mutual fund close together in time?

Post by need403bhelp »

bling wrote: Sun Nov 01, 2020 1:50 pm
need403bhelp wrote: Sun Nov 01, 2020 1:16 pm
bling wrote: Sun Nov 01, 2020 12:01 pm
need403bhelp wrote: Sun Nov 01, 2020 11:48 am EDIT: There is a "time-in-force" option, for which I can choose "day" or "market-on-close." This is separate from the order type option where I can choose "limit," "market," etc. Would a "market-on-close" order simply have the type "market" and "time-in-force" of "market-on-close," or is this something different? Thanks!
yes, market order + market-on-close time-in-force.

but to reiterate, i do not recommend that you do this unless you understand the consequences. let's say you put in for 100 shares, and price moves up 2%, if you don't have enough money you'll end up buying on margin.
I see. I don't have margin enabled on my account. So what will happen?
call them and ask. it might be cancelled. or your balance could go negative and you'll get a "margin call" to deposit more before the trade settles in T+2.

or...avoid this and just do it manually. it takes 5 seconds to login and another 5 seconds to place the trade. they even have a calculator right there on the website to calculate the correct # of shares.
Ok. So I just set order type to "market" and "time-in-force" to "day" to avoid problems, correct? Thanks!

EDIT: Reading the Wiki https://www.bogleheads.org/wiki/Order#A ... k_approach and some of the other threads, it seems the lowest risk option is to make a limit order for the "ask" price. Any reason not to do this?

EDIT 2: This seems like an even better way to buy:
viewtopic.php?p=4679500#p4679500

Also, it seems the "general advice" seems to buy not too close to start or end of trading, so I'll probably have to buy a little earlier than planned.
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Re: Buy ETF & sell mutual fund close together in time?

Post by need403bhelp »

livesoft wrote: Sat Oct 31, 2020 7:32 am There is really no real need nor necessity to have these trades happen close together in time. Close enough say within hours or a day or two would be fine.

But the OP could submit the ETF within a minute or a few seconds before the market close. I would recommend earlier since they are unfamiliar with ETFs. They could submit an order to buy 1 or 2 shares earlier in the day to see how things work, then later in the day buy the rest of the shares. Or they could do something else including buying the next day. Why would it even matter anyways?
So, FWIW, I did the exchange today and decided to relax and just make the ETF purchase when I had time, which was around ~1:30 pm EST today. Looks like by end of closing my ETF was ~$750 down, so feel like I "lost" $750 on the "exchange" between ETF bought in one account and mutual fund sold in a different account.

With that said, maybe it'll even out over time. But I'm a little bummed.

I didn't do an end-of-market order as I heard those don't execute well, and I didn't really have time to do it closer to end of trading day.
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Re: Buy ETF & sell mutual fund close together in time?

Post by absolute zero »

need403bhelp wrote: Wed Nov 18, 2020 9:23 pm
livesoft wrote: Sat Oct 31, 2020 7:32 am There is really no real need nor necessity to have these trades happen close together in time. Close enough say within hours or a day or two would be fine.

But the OP could submit the ETF within a minute or a few seconds before the market close. I would recommend earlier since they are unfamiliar with ETFs. They could submit an order to buy 1 or 2 shares earlier in the day to see how things work, then later in the day buy the rest of the shares. Or they could do something else including buying the next day. Why would it even matter anyways?
So, FWIW, I did the exchange today and decided to relax and just make the ETF purchase when I had time, which was around ~1:30 pm EST today. Looks like by end of closing my ETF was ~$750 down, so feel like I "lost" $750 on the "exchange" between ETF bought in one account and mutual fund sold in a different account.

With that said, maybe it'll even out over time. But I'm a little bummed.

I didn't do an end-of-market order as I heard those don't execute well, and I didn't really have time to do it closer to end of trading day.
The exact same thing happened to me a couple months ago (I started a thread about it). In my case, I sold mutual fund shares and simultaneously bought ETF shares at about 3PM Eastern Time. In the final hour prices tanked and I lost $1200.

I’m not sure why you put “lost” in quotation marks. It’s a real loss. You were temporarily levered to higher than usual equity exposure, and the market declined during that brief period of leverage. That being said, it’s okay. For me, it was just a lesson. Thinking of the money I’ve earned over the years by being a disciplined and cool-headed investor made me forget the $1200 pretty quickly.
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Re: Buy ETF & sell mutual fund close together in time?

Post by need403bhelp »

absolute zero wrote: Wed Nov 18, 2020 10:54 pm
need403bhelp wrote: Wed Nov 18, 2020 9:23 pm
livesoft wrote: Sat Oct 31, 2020 7:32 am There is really no real need nor necessity to have these trades happen close together in time. Close enough say within hours or a day or two would be fine.

But the OP could submit the ETF within a minute or a few seconds before the market close. I would recommend earlier since they are unfamiliar with ETFs. They could submit an order to buy 1 or 2 shares earlier in the day to see how things work, then later in the day buy the rest of the shares. Or they could do something else including buying the next day. Why would it even matter anyways?
So, FWIW, I did the exchange today and decided to relax and just make the ETF purchase when I had time, which was around ~1:30 pm EST today. Looks like by end of closing my ETF was ~$750 down, so feel like I "lost" $750 on the "exchange" between ETF bought in one account and mutual fund sold in a different account.

With that said, maybe it'll even out over time. But I'm a little bummed.

I didn't do an end-of-market order as I heard those don't execute well, and I didn't really have time to do it closer to end of trading day.
The exact same thing happened to me a couple months ago (I started a thread about it). In my case, I sold mutual fund shares and simultaneously bought ETF shares at about 3PM Eastern Time. In the final hour prices tanked and I lost $1200.

I’m not sure why you put “lost” in quotation marks. It’s a real loss. You were temporarily levered to higher than usual equity exposure, and the market declined during that brief period of leverage. That being said, it’s okay. For me, it was just a lesson. Thinking of the money I’ve earned over the years by being a disciplined and cool-headed investor made me forget the $1200 pretty quickly.
Thanks. Yes, I suppose it is a real loss but I was trying to think more positively about it.

Is there a way to avoid such a situation when basically re-balancing a mutual fund in one account and ETF in another?

My other option could've been to purchase a Schwab mutual fund at TDA I suppose instead of VOO, which I hear (but haven't checked) are now transaction fee free. However, I'm not sure how portable a Schwab mutual fund is, as I eventually plan to move the account to Merrill Edge or otherwise to Vanguard (or possibly other brokerages for bonuses). Thanks!
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Re: Buy ETF & sell mutual fund close together in time?

Post by absolute zero »

need403bhelp wrote: Wed Nov 18, 2020 10:59 pm
Thanks. Yes, I suppose it is a real loss but I was trying to think more positively about it.
Ahh okay. Haha wasn't trying to kick you while you were down!
need403bhelp wrote: Wed Nov 18, 2020 10:59 pm Is there a way to avoid such a situation when basically re-balancing a mutual fund in one account and ETF in another?

My other option could've been to purchase a Schwab mutual fund at TDA I suppose instead of VOO, which I hear (but haven't checked) are now transaction fee free. However, I'm not sure how portable a Schwab mutual fund is, as I eventually plan to move the account to Merrill Edge or otherwise to Vanguard (or possibly other brokerages for bonuses). Thanks!
One thought if you are interested in using Vanguard is to purchase mutual fund shares there (in a brokerage account, Roth IRA, whatever it may be). Then you get to purchase and sell mutual fund shares at the same time across your accounts. Afterwards, if you prefer ETF's, you can just convert the Vanguard mutual fund shares to ETF's the next day (also done at NAV). I believe Vanguard is the only brokerage that allows this.

Another option is to purchase the ETF at 3:55, but I agree that it requires you to be free at 3:55.

Third option is to break the transaction up into a couple chunks. E.g. if you only have free time at lunch to get online and you want to exchange $80k, do $40k today and $40k tomorrow. Spread things out a bit.

I won't comment on the fourth option (setting up ETF purchase to execute at close of trading day) because I've never done it before. Seems like an interesting option though.
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Re: Buy ETF & sell mutual fund close together in time?

Post by need403bhelp »

absolute zero wrote: Wed Nov 18, 2020 11:17 pm
need403bhelp wrote: Wed Nov 18, 2020 10:59 pm
Thanks. Yes, I suppose it is a real loss but I was trying to think more positively about it.
Ahh okay. Haha wasn't trying to kick you while you were down!
need403bhelp wrote: Wed Nov 18, 2020 10:59 pm Is there a way to avoid such a situation when basically re-balancing a mutual fund in one account and ETF in another?

My other option could've been to purchase a Schwab mutual fund at TDA I suppose instead of VOO, which I hear (but haven't checked) are now transaction fee free. However, I'm not sure how portable a Schwab mutual fund is, as I eventually plan to move the account to Merrill Edge or otherwise to Vanguard (or possibly other brokerages for bonuses). Thanks!
One thought if you are interested in using Vanguard is to purchase mutual fund shares there (in a brokerage account, Roth IRA, whatever it may be). Then you get to purchase and sell mutual fund shares at the same time across your accounts. Afterwards, if you prefer ETF's, you can just convert the Vanguard mutual fund shares to ETF's the next day (also done at NAV). I believe Vanguard is the only brokerage that allows this.

Another option is to purchase the ETF at 3:55, but I agree that it requires you to be free at 3:55.

Third option is to break the transaction up into a couple chunks. E.g. if you only have free time at lunch to get online and you want to exchange $80k, do $40k today and $40k tomorrow. Spread things out a bit.

I won't comment on the fourth option (setting up ETF purchase to execute at close of trading day) because I've never done it before. Seems like an interesting option though.
Thanks, I will probably end up buying at 3:55 CST on the one day a week I think I can do it most weeks.

Breaking up transaction also sounds like a good idea.

Unfortunately, for the purposes of this transaction, it has to be moved between retirement accounts in cash and Vanguard isn't currently an option as this type of transaction is too new for them to apparently have standard forms to do this process (and I don't want to deal with it being screwed up during tax time). TDA actually has all the forms and seems to have processed it correctly, but I'm stuck with their options unless I pay $50 to buy Vanguard mutual fund.
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Re: Buy ETF & sell mutual fund close together in time?

Post by livesoft »

If one does these kinds of transactions numerous times, then I think that one may find that sometimes they come out ahead and sometimes behind if they are not doing them essentially simultaneously near the market close. So to recover your $750 you will need to keep trying and perhaps do things a full day or two apart. :twisted:
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Re: Buy ETF & sell mutual fund close together in time?

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000 wrote: Fri Oct 30, 2020 10:47 pm If TD Ameritrade supports a market-on-close order, you can use that to buy the ETF on the same day the mutual fund sale is processed. Of course, you will likely pay a little more in the spread with a market-on-close order.
What spread is this? I get the impression buyers and sellers get the same closing price and there's no spread.
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Re: Buy ETF & sell mutual fund close together in time?

Post by 000 »

tfb wrote: Sat Nov 21, 2020 12:02 pm
000 wrote: Fri Oct 30, 2020 10:47 pm If TD Ameritrade supports a market-on-close order, you can use that to buy the ETF on the same day the mutual fund sale is processed. Of course, you will likely pay a little more in the spread with a market-on-close order.
What spread is this? I get the impression buyers and sellers get the same closing price and there's no spread.
How could there be no spread?
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Re: Buy ETF & sell mutual fund close together in time?

Post by livesoft »

000 wrote: Sat Nov 21, 2020 5:14 pmHow could there be no spread?
In the same way that orders filled at the opening cross have no spread and in the same way that mutual fund transactions have no spread.
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Re: Buy ETF & sell mutual fund close together in time?

Post by grabiner »

tfb wrote: Sat Nov 21, 2020 12:02 pm
000 wrote: Fri Oct 30, 2020 10:47 pm If TD Ameritrade supports a market-on-close order, you can use that to buy the ETF on the same day the mutual fund sale is processed. Of course, you will likely pay a little more in the spread with a market-on-close order.
What spread is this? I get the impression buyers and sellers get the same closing price and there's no spread.
There is no spread as such, but in a low-volume ETF, your on-open or on-close order could move the market, or could even be the market. If the highest buy order at the close, other than yours, is $49.50, and the lowest sell is $50.50, then your market-on-close order will execute at $49.50 if it is a sell and $50.50 if it is a buy, which has the same effect as if you placed an order into a 2% spread. If other orders are matched, the cross price is the price which allows the most shares to be traded, so adding a buy order might raise the cross price. In an ETF which normally trades at a one-cent spread, a market-on-open or market-on-close should be just as safe as any other market order.
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Re: Buy ETF & sell mutual fund close together in time?

Post by need403bhelp »

grabiner wrote: Sat Nov 21, 2020 8:52 pm
tfb wrote: Sat Nov 21, 2020 12:02 pm
000 wrote: Fri Oct 30, 2020 10:47 pm If TD Ameritrade supports a market-on-close order, you can use that to buy the ETF on the same day the mutual fund sale is processed. Of course, you will likely pay a little more in the spread with a market-on-close order.
What spread is this? I get the impression buyers and sellers get the same closing price and there's no spread.
There is no spread as such, but in a low-volume ETF, your on-open or on-close order could move the market, or could even be the market. If the highest buy order at the close, other than yours, is $49.50, and the lowest sell is $50.50, then your market-on-close order will execute at $49.50 if it is a sell and $50.50 if it is a buy, which has the same effect as if you placed an order into a 2% spread. If other orders are matched, the cross price is the price which allows the most shares to be traded, so adding a buy order might raise the cross price. In an ETF which normally trades at a one-cent spread, a market-on-open or market-on-close should be just as safe as any other market order.
Thanks. So does that mean it should be safe to use a market-on-close order to purchase VOO?
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Re: Buy ETF & sell mutual fund close together in time?

Post by grabiner »

need403bhelp wrote: Sat Nov 21, 2020 10:14 pm
grabiner wrote: Sat Nov 21, 2020 8:52 pm
tfb wrote: Sat Nov 21, 2020 12:02 pm
000 wrote: Fri Oct 30, 2020 10:47 pm If TD Ameritrade supports a market-on-close order, you can use that to buy the ETF on the same day the mutual fund sale is processed. Of course, you will likely pay a little more in the spread with a market-on-close order.
What spread is this? I get the impression buyers and sellers get the same closing price and there's no spread.
There is no spread as such, but in a low-volume ETF, your on-open or on-close order could move the market, or could even be the market. If the highest buy order at the close, other than yours, is $49.50, and the lowest sell is $50.50, then your market-on-close order will execute at $49.50 if it is a sell and $50.50 if it is a buy, which has the same effect as if you placed an order into a 2% spread. If other orders are matched, the cross price is the price which allows the most shares to be traded, so adding a buy order might raise the cross price. In an ETF which normally trades at a one-cent spread, a market-on-open or market-on-close should be just as safe as any other market order.
Thanks. So does that mean it should be safe to use a market-on-close order to purchase VOO?
Yes, since VOO trades in huge volumes; you can't move the market price by trading $10K of it.

I think more about these issues because I hold VSS (Vanguard FTSE All-World Ex-US Small-Cap ETF), which sometimes has no trades at the market open, or large spreads just after the open; I often have to wait for the spread to narrow before making a purchase.
Wiki David Grabiner
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need403bhelp
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Re: Buy ETF & sell mutual fund close together in time?

Post by need403bhelp »

grabiner wrote: Sat Nov 21, 2020 10:18 pm
need403bhelp wrote: Sat Nov 21, 2020 10:14 pm
grabiner wrote: Sat Nov 21, 2020 8:52 pm
tfb wrote: Sat Nov 21, 2020 12:02 pm
000 wrote: Fri Oct 30, 2020 10:47 pm If TD Ameritrade supports a market-on-close order, you can use that to buy the ETF on the same day the mutual fund sale is processed. Of course, you will likely pay a little more in the spread with a market-on-close order.
What spread is this? I get the impression buyers and sellers get the same closing price and there's no spread.
There is no spread as such, but in a low-volume ETF, your on-open or on-close order could move the market, or could even be the market. If the highest buy order at the close, other than yours, is $49.50, and the lowest sell is $50.50, then your market-on-close order will execute at $49.50 if it is a sell and $50.50 if it is a buy, which has the same effect as if you placed an order into a 2% spread. If other orders are matched, the cross price is the price which allows the most shares to be traded, so adding a buy order might raise the cross price. In an ETF which normally trades at a one-cent spread, a market-on-open or market-on-close should be just as safe as any other market order.
Thanks. So does that mean it should be safe to use a market-on-close order to purchase VOO?
Yes, since VOO trades in huge volumes; you can't move the market price by trading $10K of it.

I think more about these issues because I hold VSS (Vanguard FTSE All-World Ex-US Small-Cap ETF), which sometimes has no trades at the market open, or large spreads just after the open; I often have to wait for the spread to narrow before making a purchase.
Thanks, I do appreciate your advice. If I'm trading closer to $50-100k, would it be better to manually execute a trade at 3:55 pm EST rather than doing a market-on-close trade? I noticed you specifically said "you can't move the market price by trading $10k of it," so not sure whether increasing amount to $100k would matter. Thx!
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Re: Buy ETF & sell mutual fund close together in time?

Post by grabiner »

need403bhelp wrote: Sat Nov 21, 2020 10:48 pm Thanks, I do appreciate your advice. If I'm trading closer to $50-100k, would it be better to manually execute a trade at 3:55 pm EST rather than doing a market-on-close trade? I noticed you specifically said "you can't move the market price by trading $10k of it," so not sure whether increasing amount to $100k would matter. Thx!
I don't think even $100K would move the market for VOO, whether you do it as market-on-close or just place a market order. You can see the size of the market when you get your quote; if there are 10,000 shares at the ask price, you won't move the market at all for a buy order.
Wiki David Grabiner
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