Relative newbie here (4 years part-time). Searched the forum; searched the CME site. Can't find a definitive answer.
Do spread limit orders in commodities exist? If so, how do I use them?
I frequently read/hear about their use but have been told by 3 different brokers that they don't actually exist. Others have said my broker(s) don't know what they're talking about.
Here's what I understand using an actual example that occured today:
SMN12/SMZ12
(I've already taken good profits and am still in the trade so decided to experiment with one position, considering it the "cost of education" so-to-speak.)
Spread was 20.40, premium to July (buy side; positive spread). Brokerage firm considers this a "debit spread". My only limit order options are "limit/buy" or "limit/sell". Verifying the "debit/credit" spread requirements, I submitted a "limit/buy" order ("debit spread") at 23.00 and was immediately filled at 21.00 (expecting that this would happen). Next, I submitted a "limit/sell" order ("credit spread") at 23.00; the order was rejected and cancelled.
Speaking with the broker I'm told: there are no such "resting" limit orders for commodity spreads; if I want to enter the market at a spread that is higher (wider) than the current spread all I can do is watch the market and when it reaches my entry level submit my order at that time. A limit/buy placed above the market will be filled immediately (which I understand in outrights); a limit/buy below the market or a limit/sell on a "debit spread" will be ignored or cancelled; the opposite occurs for negative (i.e., "credit") spreads. Effectively, there is no such thing as a "limit" order in commodity spreads - you get filled immediately at market or not at all.
This runs contrary to limit orders in the outrights where you place the appropriate limit order above/below the current market and wait.
I read and hear about spread limit orders used in commodities frequently and their use is actually recommended over market orders (or so I've read). Perhaps I just don't understand the proper use of limit orders for commodity spreads? I mean, my broker does offer them but what's the point if I'm immediately filled at market? Does the limit order used in this manner just help control slippage?
Anyone have any clue what I'm talking about or dealing with here? Is my brokerage firm pulling a fast one on its novice customers? Do these limit orders actually have to be placed verbally with a full-service broker who then watches the market for you and executes at your price? Or is all this spread limit order info I've read simply a bunch of hogwash directed at us novice traders? Surely, I can't be THAT clueless (or can I [and don't call me Shirley])?
So far, I've had 3 profitable years and one not-so-much year. Just trying to learn and get better at this. Any info that can set me on the right path is greatly appreciated.
Cheers,
Thom
p.s. sorry for the long post; just wanted to be clear on my question.
Do spread limit orders in commodities exist? If so, how do I use them?
I frequently read/hear about their use but have been told by 3 different brokers that they don't actually exist. Others have said my broker(s) don't know what they're talking about.
Here's what I understand using an actual example that occured today:
SMN12/SMZ12
(I've already taken good profits and am still in the trade so decided to experiment with one position, considering it the "cost of education" so-to-speak.)
Spread was 20.40, premium to July (buy side; positive spread). Brokerage firm considers this a "debit spread". My only limit order options are "limit/buy" or "limit/sell". Verifying the "debit/credit" spread requirements, I submitted a "limit/buy" order ("debit spread") at 23.00 and was immediately filled at 21.00 (expecting that this would happen). Next, I submitted a "limit/sell" order ("credit spread") at 23.00; the order was rejected and cancelled.
Speaking with the broker I'm told: there are no such "resting" limit orders for commodity spreads; if I want to enter the market at a spread that is higher (wider) than the current spread all I can do is watch the market and when it reaches my entry level submit my order at that time. A limit/buy placed above the market will be filled immediately (which I understand in outrights); a limit/buy below the market or a limit/sell on a "debit spread" will be ignored or cancelled; the opposite occurs for negative (i.e., "credit") spreads. Effectively, there is no such thing as a "limit" order in commodity spreads - you get filled immediately at market or not at all.
This runs contrary to limit orders in the outrights where you place the appropriate limit order above/below the current market and wait.
I read and hear about spread limit orders used in commodities frequently and their use is actually recommended over market orders (or so I've read). Perhaps I just don't understand the proper use of limit orders for commodity spreads? I mean, my broker does offer them but what's the point if I'm immediately filled at market? Does the limit order used in this manner just help control slippage?
Anyone have any clue what I'm talking about or dealing with here? Is my brokerage firm pulling a fast one on its novice customers? Do these limit orders actually have to be placed verbally with a full-service broker who then watches the market for you and executes at your price? Or is all this spread limit order info I've read simply a bunch of hogwash directed at us novice traders? Surely, I can't be THAT clueless (or can I [and don't call me Shirley])?
So far, I've had 3 profitable years and one not-so-much year. Just trying to learn and get better at this. Any info that can set me on the right path is greatly appreciated.
Cheers,
Thom
p.s. sorry for the long post; just wanted to be clear on my question.
