Options Order Types: Market, Limit, Stop, and More
Master the different order types to execute your options trades effectively and avoid costly mistakes.
What is Order Types?
Order Types specify how and when you want your trade executed. Market orders execute immediately at current prices. Limit orders only execute at your specified price or better.
Using the wrong order type can cost you money. Always use limit orders for options—market orders can result in terrible fills.
TL;DR - Quick Answer
Market order = execute NOW at any price (avoid for options!). Limit order = execute at MY price or better (always use). Stop order = trigger when price hits level. ALWAYS use limit orders for options. Never use market orders.
Market Orders
Execute immediately at the best available price.
Pros: Guaranteed execution
Cons: No price control. Can get terrible fills, especially on illiquid options.
WARNING: Avoid market orders for options! Wide spreads mean you could pay far more than expected.
Limit Orders
Only execute at your specified price or better.
Buy limit: Execute at limit price or lower
Sell limit: Execute at limit price or higher
Pros: Price control, can often get filled between bid/ask
Cons: May not get filled if price never reaches your limit
ALWAYS use limit orders for options!
Stop Orders
Trigger when price hits a specified level, then execute as market order.
Stop-loss: Sell when price drops to limit losses
Stop-limit: Trigger at stop price, then use limit order
Note: Stop orders on options can be problematic due to wide spreads. Many brokers don't support them.
Best Practices
- Always use limit orders
- Start with mid-price (between bid/ask)
- Adjust if not filled within reasonable time
- Be patient—don't chase fills
Key Takeaways
- ALWAYS use limit orders for options
- Market orders = bad fills
- Start at mid-price
- Be patient for good execution
Related Options Strategies
Bid-Ask Spread
Why order type matters.
Options Liquidity
Impact on execution.
Understanding related strategies helps you choose the best approach for your market outlook and risk tolerance. Each strategy has unique characteristics that make it suitable for different market conditions.
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