Stock Option Ordering

Order entry is very important when you are working with stock options. A single error can result in money loss. There is certain wording that is used on Wall Street amongst investors to prevent errors. Any clerks working with order entry are taught from the very first day to listen and repeat. They must verify their orders the very same way. Everything is listen and repeat. If there are any discrepancies, then the process is started over and, once again, it is listen and repeat.

If the average everyday individual who invests learns some of the lingo that is used in stock option ordering, you can be ahead of the game. You can also work well with your financial advisor when you know some of the lingo that is used in ordering.

Ordering

The process of ordering stocks is fairly complicated, even when you aren't performing more advanced strategies like stock option covered puts. When ordering, you have to identify yourself. Once you do, you then have to say something to the effect of, "Buy 20 calls ABC February 50's at 1 ½ to open, for the day."

You have to state whether what you are doing is a buy or a sell. This means that the clerk will use the right ticket to place the order.

The "20 calls" is your number of contracts. You don't have to mention the dollar amount of the number of the underlying shares. You definitely don't want to buy 2000 contracts when you mean to buy 20.

The ABC is the stock. You can call it by name and then mention the symbol after you say the name. That's if you know the symbol.

The fourth part is the expiration month. Because the floor where the clerk is can be noisy, individuals tend to use nicknames to differentiate the months. For instance, September and December can sound the same. This means that "Labor Day 50s" or "Christmas 50s" may be used to identify the month.

The fifth part is the strike price. The 50 mentioned above is your strike price. You will then need to name the limit price or if it is a market order and state the quantity if you are dealing with something other than the market order or limit.

You then have to state the position of the trade. You state whether it is to open or to close. This simply tells the clerk that you are starting a new position (opening) or if you are working with an existing one (closed). If there are any restrictions regarding your order, you want to place those restrictions at the end. You may say something such as: Fill, kill, cancel, immediate, all or none.

Lastly, you state if your order is a day order or a good until cancelled order. If you don't specify, the clerk will assume it is for the day only.

These are the steps that are used in placing a correct order. You do want to make sure you speak loudly and clearly when placing an order. The clerk is located in an area that is very noisy, so make sure you annunciate.

Financial Advisor

Proper stock option ordering is very important in order for everything to be correct and for the investment to be a valid one. You can rely on your financial advisor to do your orders for you. By understanding the lingo, both of you will be able to work well together. As a matter of fact, you will feel better about what you are doing when you learn some of the terminology yourself. You will better understand what it is your financial advisor is doing for you when orders are placed and this can help you to identify errors if errors would occur.

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