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 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 Order.
A Limit Order is an order to buy or sell a security at a specified 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. Depending on the current price of the security, a Limit Order may never execute.
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 may not result in 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. A Stop or Stop-Limit Order may not execute at or even near the stop trigger price. Depending on the current price of the security, a Stop or Stop-Limit Order may never execute.
Stop activation for equity and ETF securities
Equity and ETF (Exchange Traded Fund) Stop Orders are handled by the market centers to which the orders are routed and are triggered based on the last trade in the relevant security (“Last Trade”), subject to conditions set by the relevant market center. A Stop Order will not trigger at the Last Trade price unless the conditions set by the market center are met.
A Buy-Stop Order will be triggered when the Last Trade price is equal to or above the stop price.
A Sell-Stop Order will be triggered when the Last Trade price is equal to or below the stop price.
Stop activation conditions for options
Option Stop Orders are triggered based on the exchange to which the order is routed. Depending on the exchange, the stop may trigger on the exchange’s BBO (Best Bid and Offer), the NBBO (National Best Bid and Offer), the Last Trade on the exchange, or the Last Trade on the consolidated tape.