Stop Limit Order - Options
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. Investors often use stop limit orders in an attempt to limit a loss or protect a profit, in case the price of the contract moves in the wrong direction.
With a buy stop limit order, you can set a stop price above the current price of the options contract. If the contract’s bid price rises to your stop price, it triggers a buy limit order. Contracts will only be purchased at your limit price or lower.
With a sell stop limit order, you can set a stop price below the current price of the options contract. If the contract’s ask price falls to your stop price, it triggers a sell limit order. Contracts will only be sold at your limit price or higher.
If the market is closed, the order will be queued for market open. Just like other option orders, these orders will not execute during extended hours.
Keep in mind, short-term market fluctuations may prevent your order from being executed, or cause the order to trigger at an unfavorable price. For example, if the market jumps between the stop price and the limit price, the stop will be triggered, but the limit order will not be executed
Also, once your stop order becomes a limit order, there has to be a buyer and seller on both sides of the trade for the limit order to execute. If there aren’t enough contracts in the market at your limit price, it may take multiple trades to fill the entire order, or the order may not be filled at all.
Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Robinhood Financial does not guarantee favorable investment outcomes and there is always the potential of losing money when you invest in securities, or other financial products. Investors should consider their investment objectives and risks carefully before investing. To learn more about the risks associated with options, please read the Characteristics and Risks of Standardized Options before you begin trading options. Please also be aware of the risks listed in the following documents: Day Trading Risk Disclosure Statement and FINRA Investor Information. Supporting documentation for any claims, if applicable, will be furnished upon request.