A conditional order allows you to set order triggers for stocks and options based on the price movement of stocks, indexes, or options contracts. There are 5 types: contingent, multi-contingent, one-triggers-the-other (OTO), one-cancels-the-other (OCO), and one-triggers-a-one-cancels-the-other (OTOCO).
Contingent orders
A contingent order triggers an equity or options order based on any one of 8 trigger values for any stock, up to 40 selected indexes, or any valid options contract.
- Trigger values: last trade, bid, ask, volume, change % up, change % down, 52-week high, and 52-week low.
- Market, limit, stop loss, and trailing stop loss are available order types once the contingent criterion is met.
- Security type: stock or single-leg options.
- Time-in-force: For the contingent criteria and for the triggered order, it can be for the day, or good 'til canceled (GTC). The time-in-force for the contingent criteria does not need to be the same as the time-in-force for the triggered order.
Example of a contingent order
1. You place a Contingent order to buy XYZ stock at a limit of $25 if the UVW index moves up more than 1.25%. 2. A rally occurs that pushes the index up 1.30% on the day... 3. ...which triggers a limit order to buy XYZ at $25. 4. XYZ hits your limit of $25 so shares are bought.
Multi-contingent orders
A multi-contingent order triggers an equity or option order based on a combination of 2 trigger values for any stock or up to 40 selected indexes. The criteria can be linked by "and at the same time," "or," or "then."
"And at the same time" is chosen if both criteria must be met at the same time.
"Or" is chosen if either 1 of the 2 criteria must be met.
"Then" is chosen if the criteria must be met in sequential order.
- Trigger values: last trade, bid, ask, volume, change % up, change % down, 52-week high, and 52-week low.
- Security type: Stock or single-leg options.
- Time-in-force: For the contingent criteria and for the triggered order, it can be for the day, or good 'til canceled (GTC). The time-in-force for the contingent criteria does not need to be the same as the time-in-force for the triggered order.
Example of a multi-contingent order
1. You purchase XYZ at $25 and place a Multi-Contingent order to sell XYZ at the market if... 2A. ...XYZ's last trade is less than $20... 2B. ...or XYZ hits a new 52-week high of $32. 3. XYZ moves up to $32 which triggers your order to sell. Your order fills at $32.01.
One-triggers-the-other (OTO)
A one-triggers-the-other order actually creates both a primary and a secondary order. If the primary order executes, the secondary order automatically triggers. This type of order can help you save time: place a buy order as your primary order and a corresponding sell limit, sell stop, or sell trailing stop at the same time. Or, if you trade options regularly, use an OTO order to leg into a buy-write or covered call position. Trailing stop orders are available for either or both legs of the OTO.
- Security type: Any combination of stock and/or single-leg options.
- Time-in-force: Can be different for each order.
- For OTO orders that are good ’til canceled (GTC), the whole order is good for 180 days (e.g., if the primary order executes on day 30, the secondary order is live for 150 days).
- If the primary order is canceled, the secondary order is also canceled.
- If the secondary order is canceled, the primary order remains open as a separate order.
Example of a one-triggers-the-other order
1. You place an OTO to buy XYZ at $30 and sell at a $2 trailing stop loss. 2. The stock drops to $30, which triggers a buy order of XYZ stock that executes and... 3. ...a sell trailing stop loss order with a $2 trail is placed with an initial trigger price of $28. 4. XYZ moves up to $35... 5. ...so the new trigger price for the trailing stop order is $33. 6. XYZ trades down to $33, which triggers the trailing stop order and shares are sold at the market.
One-cancels-the-other (OCO)
With a one-cancels-the-other order (OCO), 2 orders are live so that if either executes, the other is automatically triggered to cancel.
When orders are placed for retirement accounts, a price-reasonability check helps prevent both OCO orders from executing in a fast market. This feature does not exist in nonretirement accounts.
- Security type: Any combination of stocks or single-leg options.
- Time-in-force: Must be the same for both orders.
- Orders can be for the same shares of the same stock or option contracts, but on opposite sides of the market (sell limit and sell stop).
Example of a one-cancels-the-other order
1. You buy XYZ stock at $23. 2. XYZ stock rises to $25. 3. You place an OCO with a sell order of $27 and... 4. ...a sell stop at $24. 5. XYZ stock hits $27, so your sell order executes and... 6. ...your sell stop order is canceled.
One-triggers-a-one-cancels-the-other (OTOCO)
In a one-triggers-a-one-cancels-the-other order, you place a primary order which, if executed, triggers 2 secondary orders.
If either of these secondary orders executes, the other is automatically canceled.
- Security type: Any combination of stocks or single-leg options.
- Time-in-force: Primary can be different than both secondary orders. However, both secondary orders must have the same time-in-force.
Example of a one-triggers-a-one-cancels-the-other order
1. You place an order to buy XYZ at $25. 2. At the same time, you place 2 sell orders, one at stop loss for $23 and one at a limit of $27. 3. XYZ trades at $25. 4. Your buy order executes. 5. Simultaneously, your 2 sell orders are triggered. 6. XYZ drops to $23. 7. Your stop loss order executes and your limit order is automatically canceled.