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Types of Advanced Conditional Orders for Stock Investments

Advanced conditional orders let stock investors combine two or three orders that, if filled, will either cancel or trigger additional orders. Imagine saying to yourself, “Gee, I’m committed to my current stock, Stock A, and I hope it continues to go up. I’d love to get Stock B, but the only way I’d buy Stock B is if Stock A were crashing and I sold it.”

It’s kinda like being at the supermarket and saying, “I’ll buy the veal only if the beef isn’t on sale, but if the beef is on sale, I’ll get that (unless it’s Tuesday, which is chicken day, of course). Well, you get the point. Sometimes the situation (whether in the stock market or just real-life) is a combination “what-if/then-that” scenario.

The following are three of the most common advanced conditional orders that you’ll encounter:

  • One cancels another (OCA) order: In this case, you actually submit two simultaneous orders. If one is filled, the other is automatically canceled. Say you want to buy one of two stocks but not both. With the OCA order, you can do that because filling the order to buy Stock A will automatically cancel the order to buy Stock B.

  • One triggers another (OTA) order: If this order is filled, another order is automatically and subsequently submitted.

    Say you have a stock (Stock A) and would like to buy another stock (Stock B) but only if you can use the purchase money from the proceeds from the sale of Stock A. The OTA order says that if Stock A hits a certain price, sell Stock A and then subsequently buy Stock B.

  • One triggers two (OTT) order: If this order is filled, it automatically submits two subsequent orders. Say you own a stock (Stock A) at $50 a share, and you’re worried that it may fall below $48. You would like to buy Stock B at $45 and then enter a stop-loss order for Stock B at $40.

    The OTT order would sell Stock A when it hits $48 and then enter two subsequent orders: buy Stock B at $45 and put on a stop-loss order for Stock B at $40.

As you get more knowledgeable and confident in your investing pursuits, you may want to try the following advanced conditional orders, which build on those in the preceding list.

  • OT/OCA: One order triggers an OCA order. When you submit an order and it’s filled, two orders are simultaneously submitted. If one of the second set of orders is filled, the other one is canceled.

  • OT/OTA: One order triggers an OTA order. When you submit an order and it’s filled, another order is subsequently submitted, and if that second order is filled, a third order is subsequently submitted.

  • OT/OTT: If one order is filled, it automatically submits two subsequent orders simultaneously. Oh yeah . . . you can get crazy with this stuff. (Keep in mind that every broker treats these orders a bit differently, so check with your broker to get the specifics.)

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