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Limit order - Options

  • Updated

A limit order is an order that is placed at a specific price chosen by the trader before it is placed. If it does not execute immediately , it will sit in the order book at the limit price chosen until it is either filled or cancelled. Limit orders give a guaranteed price as they cannot execute at a worse price than the limit price chosen. However, this means that they are not guaranteed to be filled.

Example option limit order

For example, let’s assume a bitcoin option is currently trading with a best bid of 0.04 BTC [2] and a best ask of 0.06 BTC [3]. If a limit order to buy is placed at 0.05 BTC [2,4], the order will now sit in the order book at 0.05 BTC [2,4] as the best bid. It can not execute at a worse (higher) price, however to be filled another trader must now sell into this bid. If the market moves upwards away from the limit order to buy before it is filled, the trader will be missing out on the upwards price movement. Limit orders offer a guarantee about the price, but do not guarantee being filled.

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Placing a limit order on an option Deribit

  1. Instrument selection

    1. Expiry date

    2. Strike

    3. Side

  2. RFQ. This button allows traders to send a notification to market makers that indicates they are interested in trading the instrument. This will allow market makers to put a quote into the order book for the requested size. This button is informational only, not an execution mechanism.

  3. A profit and loss calculator.

  4. Order type. Some order types are not available for certain instruments.

  5. Option limit order - The limit price is entered in the settlement currency.

  6. Option USD order - The USD value of the order is entered. The price of the order in the order book will then be regularly updated to be the closest valid price to the chosen USD value.

  7. Option IV order - The implied volatility of the order is entered. The price of the order in the order book will then be regularly updated to be the closest valid price to the chosen implied volatility.

  8. Order amount

  9. Order price

  10. Buy and Sell buttons

  11. TIF

    • Good till cancel (GTC) - GTC is the default setting. The order will remain open until it is filled, cancelled, or the instrument expires.

    • Good till day (GTD) - If it has not already been filled or cancelled, the order will be cancelled automatically at the end of the current daily session (8 AM UTC).

    • Immediate or cancel (IOC) - Any portion of the order that cannot be filled immediately will be cancelled.

    • Fill or Kill (FOK) - The order is either filled immediately and completely, or not at all.

  12. Special

    • Reduce (reduce_only) - This setting will ensure the order can only reduce an open position. It can not increase the size of any existing positions, or open any new positions.

    • Post only (post_only) - This setting will ensure the order will not act as a taker, and therefore will not match against orders that are already resting in the orderbook (excluding hidden orders). If the price of the order is such that it would otherwise execute against the best available price, the post only order will be placed into the order book one tick away from the best available price.

  13. The current position size on the selected instrument.

  14. Initial margin requirement

  15. Position impact PM (portfolio margin).