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Got an option trading up at $0.40, spread is $0.34B x $0.45A, so I went to set a stop limit on the order at $0.35, but the broker popped up a message that said:

"Your stop price is at or above the current ask price $0.34 and will likely be filled immediately"

Well thats not true, the ask is $0.45, so why am I getting this message? Does the stop limit operate off the bid and they erroneously have "ask" in that message?

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  • Are you long the option? It may just be a typo in their message but if you're placing a limit sell order, currently your limit sell price is below the bid, so it would get filled (sell if the sell price goes below $0.35).
    – D Stanley
    Sep 24 at 15:59
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    Not really a clear question since a stop limit order involves two prices (the stop price and the limit price). Sep 24 at 16:06
  • @BobBaerker I thought it was pretty clear, the message said the stop price was higher than the current ask for a particular option, which made no sense.
    – pstatix
    Sep 25 at 3:36
  • @DStanley My apologies, but it was not a limit sell, it was a stop limit sell (so kind of a limit sell). But the bid for this option was $0.34, and I was putting a stop limit sell at $0.35 with a limit of $0.34; yet the message said my stop price ($0.35) was higher than the ask. How did you reason that my limit sell is below the bid? Do you mean it was below mark which was $0.40?
    – pstatix
    Sep 25 at 3:39
  • A stop (limit) sell order means "execute this order if the price goes below X". For a sell, that price is the bid. So your stop at 0.35 would be executed. That would then create a limit sell which means sell at any price higher than Y. So your stop order would create a limit sell at 0.35 which would likely be filled since that's the current ask.
    – D Stanley
    Sep 25 at 15:23
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The bid is the lower price and the ask is the higher price so someone has made a typo.

A sell stop-limit order combines a stop order and a limit order. If the stop price is reached, a limit order is triggered to execute at a specified price or better.

Your question only contains one price so I'm wondering if you meant a limit order to sell rather than a sell stop-limit order? If so, a limit order to sell at 35 cents when the quote is $0.34 x $0.45 would be likely to execute because splitting the B/A is quite common with options.

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  • I was attempting to put a stop limit order with a stop price of $0.35 and a limit price of $0.34; the quote was as you said, but the message said my stop price was above ask and would likely be filled immediately. Even if my stop price is above bid, and the message had a typo, I don't understand why it would get filled immediately if above bid.
    – pstatix
    Sep 25 at 3:40
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A stop (limit) sell order means "execute this order if the price goes below X". For a sell, that price is the bid. So your stop at 0.35 would be executed. That would then create a limit sell which means sell at any price higher than Y. So your stop order would create a limit sell at 0.35 which would likely be filled since that's the current ask.

All of that makes sense if their message just has a typo and said "ask" instead of "bid".

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  • Okay, but my stop at $0.35 was above bid, which was at $0.34, so it shouldn't be executed right away. Further, my limit was at $0.33, below the bid; this is ideal since the bid was $0.34, it was likely that my limit order would get filled above $0.33 in the even that the stop order is executed. My guess is that since $0.35 is above the bid, at $0.34, that means that the price has fallen below "X" and thus the stop is executed right away.
    – pstatix
    Sep 27 at 14:22

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