Stop limit order for options | Robinhood

Stop limit order for 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.

Buy stop limit order

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 increases to your stop price, it triggers a buy limit order. Contracts will only be purchased at your limit price or lower.

Example

Let’s say you place a buy stop limit order with a stop price of $2 and limit price of $2.50.

  • If the option has a trade execute or a bid price of $2 or higher for this order, your stop price will be triggered.
  • Then your limit order to buy the option at $2.50 becomes active, which tries to buy the option for $2.50 or less.
  • The order will only fill if the ask price is at $2.50 or lower after the stop has been triggered.

Sell stop limit order

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.

Example

Let’s say you place a sell stop limit order with a stop price of $1 and a limit price of $0.50.

  • If the option has a trade execute or an ask price of $1 or lower for this order, your stop price will be triggered.
  • Then your limit order to sell the option at $0.50 becomes active, which tries to sell the option for $0.50 or more.
  • The order will only fill if the bid price is at $0.50 or after the stop has been triggered.

Why these orders don’t fill

The following are some of the more common reasons why stop limit orders for options don’t fill:

  • 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.
  • Short-term market fluctuations may prevent your order from being executed. For example, if the market jumps between the stop price and the limit price, the stop will be triggered, but the limit order won’t execute.
  • After your stop order becomes a limit order, there must 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.
  • The limit price is the same as the stop price. A stop limit can be useful but as with any limit order, the price is guaranteed but not the fill. In a fast moving or trending market, stops will often trigger but leave the limit order working at a former price level. Risk of leaving an unfilled limit order can be reduced by choosing a more aggressive limit price than stop price. While this may result in a less favorable fill price, it increases the likelihood of a fill when the stop is triggered.
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All investing involves risk.

Brokerage services are offered through Robinhood Financial LLC, (“RHF”) a registered broker-dealer (member SIPC) and clearing services through Robinhood Securities, LLC, (“RHS”) a registered broker dealer (member SIPC). Cryptocurrency services are offered through Robinhood Crypto, LLC (“RHC”) (NMLS ID: 1702840). The Robinhood Money spending account is offered through Robinhood Money, LLC (“RHY”) (NMLS ID: 1990968), a licensed money transmitter. Credit card products are offered by Robinhood Credit, Inc. (“RCT“) (NMLS ID: 1781911 and issued by Coastal Community Bank, pursuant to a license from Visa U.S.A. Inc.

The Robinhood Cash Card is a prepaid card issued by Sutton Bank, Member FDIC, pursuant to a license from Mastercard® International Incorporated. RHF, RHY, RHC and RHS are affiliated entities and wholly owned subsidiaries of Robinhood Markets, Inc. RHF, RHY, RHC and RHS are not banks. Securities products offered by RHF are not FDIC insured and involve risk, including possible loss of principal. Cryptocurrencies held in RHC accounts are not covered by FDIC or SIPC protections and are not regulated by FINRA. RHY products are not subject to SIPC coverage but funds held in the Robinhood Money spending account and Robinhood Cash Card account may be eligible for FDIC pass-through insurance (review the Robinhood Cash Card Agreement and the Robinhood Spending Account Agreement).

Options trading entails significant risk and is not appropriate for all customers. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount.

Commission-free trading of stocks, ETFs and options refers to $0 commissions for Robinhood Financial self-directed individual cash or margin brokerage accounts that trade U.S. listed securities and certain OTC securities electronically. Keep in mind, other fees such as trading (non-commission) fees, Gold subscription fees, wire transfer fees, and paper statement fees may apply to your brokerage account. Please see Robinhood Financial's Fee Schedule to learn more.

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