Options Made Easy: Your Guide to Profitable Trading, Second Edition

Types of Order in the Market

Market Order

This is where you authorize your broker to buy or sell stock or options at the best price in the market.

Limit Order

This is where you:

• only buy if share falls to a certain price or lower; or

• only sell if share rises to certain price or higher.

Limits are recommended with options, particularly for spreads and combination trades. The reason for this is that the bid/ask spread prices can fluctuate dramatically and often not in your favor, so it’s better to specify your prices.

Stop Loss/Sell Stop (Defensive)

This is where you:

• Sell if stock falls below a certain price (sell stop is placed below the current price).

You can increase the stop loss if the share rises.

Buy Stops

This is where you will only ...