One Cancels Other Order (OCO)
Commonly called a bracket order, a one-cancels-other (OCO) order allows for two orders to be placed simultaneously. If one order executes, the other order is automatically cancelled.
For example, if you place an order to buy one stock at a specific price and sell another one short at a different price, the one that's filled first cancels the other one. With a current position, you might also use an OCO order to either protect your profit with a limit order at a higher price or limit your losses with a stop-limit-on-quote order at a lower price. In this example, selling at one price voids the order to sell at the other.
You currently own Company A at $45. You decide to enter an OCO order with an order above and below the current stock price.
You want to capture potential gains by selling your shares of Company A if the stock goes up to $50. You want to limit your potential losses by selling your shares of Company A if the stock price drops by more than $10.
To do this, you enter an OCO order including:
- A sell limit order with a limit price of $50 and
- A trailing stop-on-quote order with a trailing stop amount of $10.
Company A's price rises to $48. The trailing stop-on-quote amount follows the price of the stock, minimizing your potential losses. The stock then begins to fall and eventually reaches the trailing stop price of $38.
The trailing stop-on-quote order is triggered and the limit order is cancelled.
Advanced orders are only available for listed equities trading at $1.00 per share or higher, exchange-traded funds (ETFs), and options.
Investors should consider the investment objectives, risks, charges, and expenses of an Exchange Traded Fund (ETF) carefully before investing. A prospectus contains this and other information about the ETF and can be obtained from the issuer. The prospectus should be read carefully before investing.
Options involve risk and are not suitable for all investors. Detailed information on our policies and the risks associated with options can be found in Scottrade's Options Application and Agreement, Brokerage Account Agreement, and Characteristics and Risks of Standardized Options (available at your local Scottrade branch office or from the Options Clearing Corporation at 1-888-OPTIONS or by visiting www.888options.com). All option accounts require prior approval by Scottrade. Market volatility, volume, and system availability may impact account access and trade execution. Supporting documentation for any claims will be supplied upon request.