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What is a Stop-Limit Order for Option?


A stop-limit order is an order that goes live at your predetermined stop price and will be filled at your predetermined limit price or better. A stop-limit order does not guarantee execution if the market price does not reach the stop price during a specific time period.


Assume that the current market price of the Company X option is USD5:


BUY: If you submit a buy stop-limit on option of Company X with a stop price of USD5.15 and a limit price of USD5.20, and when the market price rises to trade at USD5.15 or higher, the buy limit order will be triggered. As long as the order can be filled under USD5.20, the limit price, the trade will be filled.


Assume that the current market price of the Company X option is USD7:


SELL: If you submit a sell stop-limit call option of Company X with a stop price of USD4.95 and a limit price of USD4.90, and when the market price drops to trade at USD4.95 or lower, the sell limit order will be triggered. As long as the order can be filled above USD4.90, the limit price, the trade will be filled.

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