Let's say I put a limit order on a stock right before close...

S

Saltynuts

Let's say 1 second before close I put a limit buy on a stock a good bit below the current stock price. Let's say stock closes at 10, I place the limit order at 9.8 one second before close. Limit order is good for 90 days (the max IB will let you keep one in place without re-placing it).

If the next day the stock opens at 9.6 and goes only lower from there, there are no shenanigans that can be pulled where by since I put my limit in at 9.8 the broker can fill it at that price and say "you should be happy, that was the limit you placed, and you got it!", correct? My fill should absolutely be at 9.6 or lower, correct? Possible to get burned in this scenario? I don't mean by price action, I mean shitty BS fills type stuff.

Thanks!!!
 
If it’s during the day and lit, then the price must fall within the NBBO, so you could even use the market order and be fine.
But on illiquid stocks someone could move the price against you just to take you out, and you won’t know whether the price temporarily went up on its own, or because you were the target. You’ll only see that you got a fair price because the price went up.
 
Thank you guru! I'm trying to figure out how that would work, being taken out I mean. So I place a buy limit order at 9.8 right before close. It opens next day at 9.6. If there are ANY market sell orders around ~9.6 on open, mine buy limit should fill instantly at ~9.6 correct? To take me out, someone would have to bid bid bid to get the price up to 9.8, all before I can hit a market order at around ~9.6, and then once they've bid the market price to 9.8 they sell to me at 9.8, again all before I've hit any lower market orders? Then as soon as they sell to me they stop bidding and the price drops back down?

If that is right, I don't think any of my orders will be big enough for anyone to bother trying that. :)

Thanks!!!
 
I think this could happen if the stock isn’t traded much and opening volume is low, so someone could buy all available shares at $9.60 before you, then sell them to you at $9.80. Similar stuff actually happened to me on illiquid stocks where not many shares where traded anyway, but I wouldn’t be able to prove it, just like everyone else who imagines that the price jumped just to take them out. And won’t apply in most cases anyway, so you’re fine :)
 
Thank you guru! But if placed my limit order right before close the prior day, meaning that I'll buy at 9.8 or anything less, someone can't "cut" in front of me to buy all the $9.60 offers, can they? Or at least, can they do it legally? :)
 
Saltynuts said:
Thank you guru! But if placed my limit order right before close the prior day, meaning that I'll buy at 9.8 or anything less, someone can't "cut" in front of me to buy all the $9.60 offers, can they? Or at least, can they do it legally? :)
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I think that market makers could. They submit new bids before market opens. Someone else could also buy before you if they see your order but they offer a little higher price, say $9.61.

And usually market makers have most advanced algos, and their job is to deal between buyers and sellers, meaning front-running. Many people sued for front-running and posting fake temporary bids - complained that market makers can do that legally...

Anyway, my point is that I agree with you, but there is too much stuff happening that we don’t know about, while we see various algos playing games, which have to give them some advantage and make them money.
 
Saltynuts said:
Let's say 1 second before close I put a limit buy on a stock a good bit below the current stock price. Let's say stock closes at 10, I place the limit order at 9.8 one second before close. Limit order is good for 90 days (the max IB will let you keep one in place without re-placing it).

If the next day the stock opens at 9.6 and goes only lower from there, there are no shenanigans that can be pulled where by since I put my limit in at 9.8 the broker can fill it at that price and say "you should be happy, that was the limit you placed, and you got it!", correct? My fill should absolutely be at 9.6 or lower, correct? Possible to get burned in this scenario? I don't mean by price action, I mean shitty BS fills type stuff.

Thanks!!!
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No. When you put in a limit order of 9.80, you are telling your broker to get you shares of that stocks at 9.80 or better. If the stock goes up to 10.00 and keeps drifting higher, you will not get your order filled. Now, if at any time it dips to say 9.60, you will get filled at 9.60. If it hits 9.80 first, then, chances are good it gets filled at 9.80.
 
Saltynuts said:
Thank you guru! I'm trying to figure out how that would work, being taken out I mean. So I place a buy limit order at 9.8 right before close. It opens next day at 9.6. If there are ANY market sell orders around ~9.6 on open, mine buy limit should fill instantly at ~9.6 correct? To take me out, someone would have to bid bid bid to get the price up to 9.8, all before I can hit a market order at around ~9.6, and then once they've bid the market price to 9.8 they sell to me at 9.8, again all before I've hit any lower market orders? Then as soon as they sell to me they stop bidding and the price drops back down?

If that is right, I don't think any of my orders will be big enough for anyone to bother trying that. :)

Thanks!!!
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At 9.8 or lower, the trade is properly filled--no guarantees about 9.6; your fill f:

f <= 9.8

The opening is pretty wild, with price discovery on new news happening, volatility, and wide spreads. No guarantees about 9.6; the limit is 9.8--so it is 9.8 or lower.

Not sure what IB does internally, but it is possible to:

1. Cross the trade (find a match internally, at say 9.7)
2. Fill from their own inventory.
3. Don't ignore the arbitrage here... easy algo pick it up for 9.6 and sell to you for 9.8, and make 20 cents.

The broker/dealers have lots of tricks up their sleeves.
 
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