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Sunday, February 15, 2009

Market-If-Touched (MIT) Order

Market-If-Touched (MIT) is an order to buy / sell a security when the market reaches / touches a predetermined price level (i.e. Trigger Price) that is lower than current price for buy order, or higher than current price for sell order.
This order is held in the system until the Trigger Price is touched. Once Trigger Price is touched, the order will be submitted as a Market Order to buy / sell at the best available market price.
The same advantage & disadvantage of Market Order apply to MIT Order as well.

There are 2 types of MIT Order:

a) Buy Market-If-Touched (Buy MIT) order is an order to buy a security at the best available price if the market price of the security goes down to the Trigger Price, which is lower than current market price of the security.
Once the Trigger Price is touched, the order will turn to a Market Buy Order, to buy at the best available market price.

b) Sell Market-If-Touched (Sell MIT) order is an order to sell a security at the best available price if the market price of the security goes up to the Trigger Price, which is higher than current market price of the security.
Once the Trigger Price is touched, the order will turn to a Market Sell Order, to sell at the best available market price.

Example:
A trader identifies an ascending triangle pattern in Stock ABC. He believes that if the price rises and breaks a certain price benchmark (i.e. the breakout level of the ascending triangle pattern), it will continue to increase further. However, he also expects that the stock will make pullback first to the breakout level before continuing its upward movement.

Suppose that the breakout price is $80. The stock has already broken out that level, and is currently trading at $82. The trader wants to enter into a long position to buy at any market price, only if the price makes a pullback to the breakout level. He then submits a Buy MIT order with a Trigger Price at $80 (lower than current price of $82). His order will remain in the system until the Trigger Price is touched. If the stock does make a pullback and touches $80, the order will then be submitted as a Market Order to buy the stock at the prevailing market price at that time.

For the list of other types of order, go to: Types of Orders in Trading.

Related Topics:
* A Chance to Learn from World Class Trading Experts For FREE You Should Not Miss
* Options Trading Basic – Part 1
* Options Trading Basic – Part 2
* Learning Candlestick Charts
* Learning Charts Patterns

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