I recently just received a question from a member about trading options with Limit orders. I thought these were good questions so I thought of writing a blog entry to share the answers with everyone.

In the example, the member picked DJWQU, a PUT option on the 1/100 Dow Jones Index (Symbol: DJX) with 125 strike and expiring on May 17. The 1/100 means that the strike prices are 1/100 of the actual DJIA, so in this case, the 125 strike actually refers to 12,500 points on the DJIA. Since the DJWQU is a PUT option, the option will become In-the-money (ITM) when the DJIA goes under 12,500.

At this time, the DJWQU option is reporting a Last price of $0.14, and a Bid/Ask of $0.16/$0.25 respectively. So if someone places a Limit order to buy contracts of DJWQU at $0.15 or less, will that order get filled right away?

Given the above situation, the short answer is NO ...

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We have been getting feedback from members for the longest time asking for Limt and Stop Loss Orders. And for those of you who use our site frequently, you might have already noticed the new changes that have gone in recently. That`s right - we listened - and you can now place Limit and Stop Loss orders in addition to market orders.

In the familiar trading screen (image below), you will now see options for placing Market, Limit or Stop Loss orders, as well as an expiration time for an order (denoted with the red boxes). If you are using a Tracking Portfolio, you will also see an option to place User Price Orders (not shown).

The Basics

And here is a quick-and-dirty guide for using these different types of orders.