How do option orders work?

When placing orders for options, you can only place a buy limit order. You can close a position using a market or limit order:

Opening a position:

1. Limit order:

This allows you to specify a price at which you want to buy or sell the option. Your order is only executed if the market price reaches your desired price.

2. Market order:

To limit your exposure to slippage with market orders, you cannot place a market buy order for options.

Closing a position (exercise or sell):

1. Limit order:

As when opening a position, you can use a limit order to specify the price at which you want to sell your option contract.

2. Market order:

This closes your position immediately at the current market price.

Order duration for options orders:

Options orders have a default ‘Day’ duration. This means that the order is only valid for the current trading day and will expire if it is not filled by the market before market close. Options exchanges do not offer trading outside regular trading hours.

Options trading hours:

Before the expiration date: Options can be traded during regular market hours on US trading days.

On the expiration day: There are restrictions on opening new positions (buy to open) in the hour before market close. Any unfilled opening orders will be automatically canceled. You can still close your existing positions (sell to exercise or close) until the market closes.

Options are complex, high-risk products and are not suitable for all investors. You may lose your entire invested capital.