Stop limit order for options | Robinhood (2024)

FAQs

What is a stop order in options? ›

A stop order is an order to buy or sell a stock at the market price once the stock has traded at or through a specified price (the "stop price"). If the stock reaches the stop price, the order becomes a live market order and is typically filled at the next available market price.

A stop-limit order typically ensures that you get the price you set, but it doesn't guarantee that your trade will go through. As a result, you could be left holding shares worth far less than you anticipated. Employ a stop-limit order when you are willing to hold the shares if you can't get your desired price.

A limit order is an order to either buy stock at a designated maximum price per share or sell stock at a minimum price share. For buy limit orders, you're essentially setting a price ceiling—the highest price you'd be willing to pay for each share.

A stop limit order lets you add an additional trigger to your trade, giving you more specificity over your order execution. When the options contract hits a stop price that you set, it triggers a limit order. Then, the limit order is executed at your limit price or better.

Stop-Limit Example

Say you purchase shares at $100 a share and expect the stock to rise. You could place a stop-limit order to sell the shares if your forecast was wrong: If you set the stop price at $90 and the limit price at $90.50, the order will activate if the stock trades at $90 or lower.

The biggest drawback: You're not guaranteed to trade the stock. If the stock never reaches the limit price, the trade won't execute. Even if the stock hits your limit, there may not be enough demand or supply to fill the order. That's more likely for small, illiquid stocks.

The stop price and limit price don't have to be the same amount. The stop price you set triggers the execution of the order and is based on the price at which the stock was last traded. The limit price you set is the limit that sets price constraints on the trade and must be executed at that price or better.

Stops vs limits

A stop order is an instruction to trade when the price of a market hits a specific level that is less favourable than the current price. On the other hand, a limit order is an instruction to trade if the market price reaches a specified level more favourable than the current price.

Risk Management: Stop-limit orders are an effective way to manage risk. By setting a stop price, investors can limit their losses if the market moves against them. By setting a limit price, you can ensure that you don't get filled at a price that is too high or too low.

Narrator: To enter a Sell Stop Limit Order, you must enter a Stop price below the current security price and a Limit price less than or equal to the Stop price, ideally the lowest price you're willing to accept. $85 is entered as Stop price and $80 is set as Limit price.

Can I have a stop limit and sell order at the same time? ›

Placing a one-cancels-the-other order (OCO), or what is also commonly referred to as a bracket order, allows you to have both a limit order and a stop order open at the same time. This allows you to lock in your potential profits if a limit is reached and stop your losses if the stop is triggered all with one order.

Example of a stop order

So, you decide to go long on the shares and place a stop-entry order at 145.00. You set up the order to automatically buy 10 share CFDs of AAPL when the price hits 145.00. The margin requirement is equal to the number of shares x the price x the margin factor of 20%.

A stop order is an order to buy or sell a stock once the price of the stock reaches a specified price, known as the stop price. When the specified price is reached, your stop order becomes a market order. The advantage of a stop order is you don't have to monitor how a stock is performing on a daily basis.

Limit orders allow traders to set specific prices for desired deals and automatically execute the transaction when the price is matched. Stop-order prices are thresholds for buying or selling assets when they pass a particular value.