A conditional order requiring the transaction to be executed immediately and to its full amount at a stated price
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A fill or kill (FOK) order is a conditional order requiring the transaction to be executed immediately and to its full amount at a stated price. If any of the conditions are broken, then the order must be automatically canceled (kill) right away. Brokers usually use the FOK type of sale to purchase large amounts of stock at a set price and specific time.
When purchasing such mass amounts of stock, a slight change in price or purchase quantity can significantly impact the outcome of the trade and its final gains. As such, fill or kill orders are characterized as extreme orders.
The orders can also be used when purchasing large amounts of stock held in two or more unlinked markets. The trades are completed simultaneously where the whole order is filled in each market without the need to manually cancel it if it cannot be completed to its full extent.
Fill or Kill (FOK) orders require the transaction to go through immediately (usually within a few seconds), to the full extent of the order, and at its set price; otherwise, the order is automatically canceled. The “kill” part of the order refers to the cancellation if the order cannot be filled to its fullest extent.
Fill or kill is just one of many different order types that can be used when investing. It all comes down to the investors’ strategy and preferences when determining what kind of order to use.
“Immediate or cancel,” “good til canceled,” and “all or none” are all similar strategies to fill or kill and can all be used in slightly different situations.
Types of Orders
Fill or kill is not a commonly used order type. Other similar orders include:
“All or none” (AON) – A type of order that is similar to a FOK in the sense that it must be filled; otherwise, the order is canceled
“Immediate or cancel” (IOC) – An order that must be transacted immediately or the purchase will be canceled
“Good till canceled” (GTC) – Leaves the order open until it can be fully filled at a specified price.
An “immediate or cancel” (IOC) order fills any part of the order it can immediately and then cancels whatever cannot be filled. An IOC order can be useful if the broker does not need the entirety of the order to be filled but rather wants to capitalize at a certain price point. An “all or none” (AON) order must be fully filled; otherwise, the order is canceled.
A “good till canceled” (GTC) transaction keeps the order open until it is either canceled or has been filled at or below a specified stock price. A GTC order is used when the purchase does not need to be as immediate, and the buyer can wait longer for the entirety of the order to be filled.
Imagine an investment banker wants to purchase 100,000 shares of Company ABC stock for no more than $50 per share. The banker can place a fill or kill order to fulfill their requirement. Once placed, the order would try to be fulfilled immediately. If the fill or kill order could not acquire the correct number of shares, the share price went over $50/share, or the acquisition could not be completed immediately, the FOK order would cancel the order automatically.
The same can be imagined from the seller’s side. If ABC wants to sell 100,000 shares at $50 per share or better, it can also place a fill or kill order. If the share sale price drops below $50 by any extent or the order cannot be filled, the order will be canceled automatically.
FOK and Stock Trading
Stock trading is full of many complex strategies. Such strategies can be realized through many different order types. Strategies consider the urgency of the order, risk of the investor, the need to fill the entirety of your order, etc.
For investors looking to skip past the expense of paying advisors to invest for them, it is crucial to understand the different types of orders out there and how they fit your investing strategy. FOK is a combination of AON and IOC. It works very well when trades need to be executed quickly and for stocks that may fluctuate significantly. It is also beneficial for large quantity trades that might be considered “excessive.”
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