In investing, an at-or-better order is a trade that fills only at the set price or better while the order is live, meaning that it depends entirely on the course of the value of a security. This type of exchange can be useful in both buying and selling shares of stock. Following is some information on what the at-or-better order in stock trading is, and on its investing uses.
What is an At-Or-Better Order in Stock Trading?
This is simply a trade that acts only if it can fill at a specified price, or at a higher one. It can be like the buy stop order, taking on shares of a security only once a set price or one higher has been reached, or it can act like a sell limit order, unloading shares only once they have reached the set price or better. Both of these trades are very easy, and should be understood by traders using discount brokerage sites like E-Trade, Scottrade, TradeKing, and TD Ameritrade.
Example of a Buy At-Or-Better Order in Investing
This type of exchange trades only above the market. For example, if a stock is trading at $9.50, an investor might want to buy shares once the security has shown significant upward momentum, and reached $10 (or higher). With $10 as the buy price, the order will only fill if shares can be taken on at that value or higher while the order is live.
In case of a stock’s gapping up quickly after reaching the set buy price, a stop-limit order is a great exchange which will fill only once a certain price or higher has been reached, as long as the price does not exceed the set upper spending limit per share, set by the trader. This will prevent too much from being spent in buying, if a trader is worried about the security’s rising significantly before a buy can be made.
Example of a Sell At-Or-Better Exchange
Suppose that a security is trading at $5, and an investor in possession of some of its shares, anticipating that its value could rise, wants to unload at a higher price to get more in selling. The trader could set a sell exchange with a set sell price of $6, and the order would only fill if shares could be sold at that price or at one higher.
When to Use Above the Market Trades
At-or-better orders work only when a stock will trade at or above the set price when the order is live. One might act immediately, if the specific security is trading within the price range as the order is set, or it could not fill at all, if the price never hits the set value or higher when the order is live. So, for a successful trade, the investor will need to use prices that a security will reach.
First, in buying, this trade is used to catch rising stock as soon as it hits a certain price, which, to the investor, is the lowest value increase that indicates a continuing rise (or uptrend). If a stock is caught early by this order’s filling, then, if the trader is right, and value continues increasing, shares may be sold later for more.
The sell order is very straightforward: the trader simply sets a price that a security is likely to rise to or above, and if the stock does move up favorably, shares will be sold, netting the investor the satisfactory returns specified by the order’s sell price.