In Options Auto Trader, we use limit orders for all trades to ensure you get the best possible fills and avoid the risks associated with market orders. This article explains why we use limit orders, how our system executes them, and the exception for stop loss orders.
Why We Use Limit Orders
We only use limit orders because market orders can lead to poor fills in options trading. With market orders, you are at the mercy of the market, which can result in being "taken advantage of" with worse prices due to low liquidity or wide bid-ask spreads.
Benefits of Limit Orders:
Control Over Price: Limit orders allow you to set the maximum (for buys) or minimum (for sells) price you’re willing to accept.
Better Fills: You avoid the risk of getting unfavorable fills caused by rapid price changes or illiquid markets.
How Limit Orders Are Executed
Our system is designed to get your orders filled efficiently while maintaining control over the price.
Step-by-Step Execution Process:
Start at the Mid Price:
When placing a trade, our system starts by submitting a limit order at the mid price (the price halfway between the bid and ask prices).
Adjust the Price Every 15 Seconds:
If the order doesn’t fill within 15 seconds, the system will adjust the price slightly, moving it closer to the best possible fill price:
For credit trades, the price moves closer to the bid price.
For debit trades, the price moves closer to the ask price.
Incremental Adjustments:
The system continues adjusting the price every 15 seconds in small increments until the trade fills or 5 minutes has passed.
Why This Process Works:
Ensures you get a fair fill without rushing into a trade at an unfavorable price.
Avoids the risks of overpaying (for debit trades) or underselling (for credit trades).
Exception: Stop Loss Orders
The only exception to this process is for stop loss orders. In these cases, the priority is to exit the trade immediately to limit risk.
How Stop Loss Orders Work:
When triggered, stop loss orders place a limit order at the current ask price (for buys) or bid price (for sells).
This ensures the trade fills as quickly as possible at the best available price in the market.
Summary
Limit Orders Only: We use limit orders to ensure fair fills and avoid the downsides of market orders.
Incremental Adjustments: For open orders, the system starts at the mid price and adjusts every 15 seconds until the order fills.
Stop Loss Orders: Use limit orders at the bid/ask price for immediate execution.
By prioritizing price control and efficiency, Options Auto Trader helps you execute trades with confidence.
TERMS OF SERVICE: Please be aware that continued use of the Options Auto Trader is subject to our Terms Of Service. If you have any questions or wish to review these terms, feel free to visit the website.