Commodities For Dummies
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One of the most important pieces of information you need to indicate in a commodity transaction is the order type. This indicates how you want your order to be placed and executed.

Order Type What It Means
Fill or kill (FOK) Use this order if you want your order to be filled right away at a specific price. If a matching offer isn’t found within three attempts, your order is cancelled, or “killed.”
Limit (LMT) A limit order is placed when you want your order to be filled only at a specified price or better. If you’re on the buy side of a transaction, you want your limit buy order placed at or below the market price. Conversely, if you’re on the sell side, you want your limit sell order at or above market price.
Market (MKT) A market order is perhaps the simplest type of order. When you choose a market order, you’re saying you want your order filled at the current market price.
Market if touched (MIT) A market if touched order sounds intimidating, but it’s not. When you place an MIT, you specify the price at which you want to buy or sell a commodity. When that price is reached (or “touched”), your order is automatically filled at the current market price. A buy MIT order is placed below the market; a sell MIT order is placed above the market. In other words, you buy low and sell high.
Market on close (MOC) When you place a market on close order, you’re selecting not a specific price, but a specific time to execute your order. Your order is executed at whatever price that particular commodity happens to close at the end of the trading session.
Stop (STP) A stop order is a lot like a market if touched order because your order is placed when trading occurs at or through a specified price. However, unlike an MIT order, a buy stop order is placed above the market, and a sell stop order is placed below market levels.
Stop close only (SCO) If you choose a stop close only order, your stop order is executed only at the closing of trading and only if the closing trading range is at or through your designated stop price.
Stop limit (STL) A stop limit order combines both a stop order and a limit order. When the stop price is reached, the order becomes a limit order and the transaction is executed only if the specified price at which you want the order to go through has been reached.

To put theory into practice, consider a couple sample orders:

  • “Buy ten June 2011 CME/COMEX Gold at $1,380 Limit Day Order.” This means you’re buying ten contracts for gold on the CME/COMEX (the metals complex of the CME), with a delivery date of June 2011. You’re willing to pay $1,380 per troy ounce per contract or better. Because this is a day order, if your order isn’t filled by the end of the trading day, it will expire.

  • “Sell 100 September 2011 CME/NYMEX Crude at Market Open Order.” Through this order, you’re selling 100 contracts of crude oil on the CME/NYMEX, with a delivery date of September 2011. You’re willing to sell them at the current market price. Because this is an open order, your order will remain open for multiple trading sessions until it’s filled.

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