A stop order, also referred to as a stop-loss order, is an order to buy or sell a security once the price of the security reaches a specified price, known as the stop price. When the stop price is reached, a stop order becomes a market order. A buy stop order is entered at a stop price above the current market.
A stop-limit order is an order to buy or sell a security that combines the features of a stop order and a limit order. Once the stop price is reached, a stop-limit order becomes a limit that will be executed at a specified price (or better).
A limit order is an order to buy or sell a security at a specific price or better. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher. The limit order is not guaranteed to execute.
Specific Risk Warning
Stop order conditions and triggers are designed to minimize execution risk from wide quoted and fast-moving markets. Stop Limit orders will provide price protection but will not guarantee an execution. Stop orders are especially at risk of delivering an execution away from the market during the regular market open near 9:30 am ET, in widely quoted or fast-moving markets, and at times of market or underlying volatility. These risks should be considered when using stop orders.
Stop activation conditions for Equity and ETF securities
Equity and ETF stop orders are triggered based on the Last Trade price. The Ally Invest order routing system manages the market data triggers for stop and stop limit orders. When the stop order trigger conditions are met the order is released to the market as a market or limit order depending on the stop order type.
A Buy stop order will be released to the market when the Last Trade price is equal to or above the order stop price.
A Sell stop order will be released to the market when the Last Trade price is equal to or below the order stop price.
Stop activation conditions for Options
Option stop order activation triggers are based on a combination of the Bid and Ask prices as well as a calculation of the Bid / Ask Spread Tolerance as follows:
- If the average of the bid and ask for the option is less than $5.00, the spread between the bid and ask must be $0.50 or less (“Spread Tolerance”) for the order to be released to the market.
- If the average of the bid and ask for the option is greater than $5.00, the spread between the bid and ask must be less than 10% of the bid /ask average (“Spread Tolerance”) for the order to be immediately released to the market.
If the Spread Tolerance is greater than the criteria ($0.50 or 10%) as described, the order is not released to the market and the Spread Tolerance is recalculated every time a quote update occurs within a 30 second period (“Review Period”). If the Spread Tolerance narrows to less than the criteria ($0.50 or 10%) within the Review Period, the order is released to the market. If the spread does not narrow to less than the criteria ($0.50 or 10%) within the Review Period, the order will be released to the market after the Review Period expires.
The Spread Tolerance criteria that the order is being evaluated against may change from either the fixed $0.50 to the 10% spread calculation if the midpoint of the option quote changes during the Review Period.
If the option quote improves compared to the stop price during the Review Period, the Review Period will end and the order will remain an open order.
Buy stops on options will be triggered if the ASK price is at or above the stop price AND the option quotes fall within the Bid / Ask spread tolerance described above.
Sell stops on options will be triggered if the BID price is at or below the stop price AND the option quotes fall within the Bid / Ask spread tolerance described above.