Investor's wiki
en English
Navigation
Home Glossary
InvestingStocksBondsCryptoPersonal FinanceFundamental AnalysisTechnical AnalysisTradingBankingTaxes
Disclaimer Terms of Use Privacy Policy Cookie Policy
Navigation
Home Glossary
InvestingStocksBondsCryptoPersonal FinanceFundamental AnalysisTechnical AnalysisTradingBankingTaxes
Disclaimer Terms of Use Privacy Policy Cookie Policy

Limit-on-Close (LOC) Order

Limit-on-Close (LOC) Order
TradingTrading Skills and EssentialsTrading SkillsTrading Order Types and ProcessesTrading Orders

What Is a Limit-on-Close (LOC) Order?

A limit-on-close (LOC) order is a limit order that is designated for execution at the market close. Limit orders control the price that is paid for a security, or what price a security is sold at. The additional "on close" boundary means the order is only executed on the off chance that the closing price is inside the price limit of the order. This type of order is great only for the market close and doesn't last for the whole trading day or stretch out into the next.

A LOC order can measure up to a limit-on-open (LOO) order or a market-on-close (MOC) order.

Grasping a Limit-on-Close (LOC) Order

LOC orders are one of several conditional orders accessible to investors. They are closely comparable to LOO orders. A LOC order is a limit order with execution in light of the market's closing price.

Limit orders offer investors the opportunity to set a price for buying and selling securities. This is advantageous over a market order in light of the fact that it permits the investor to control the specific price they pay to purchase a security and the profit they receive from selling a security. On the flip side, a limit order doesn't guarantee execution in light of the fact that the price must meet or be better than the limit order price. A market order prioritizes speed over precision, executing at the current best accessible offer.

A limit order can either buy or sell shares. A limit buy order means the order will only execute at the limit price or below. For instance, in the event that a stock is trading at $50 yet a trader needs to buy at $49, they could place a limit buy at $49. The order will only fill assuming that the price tumbles to $49 or below. Orders can be partially or completely filled, contingent upon exchange terms and market liquidity.

A limit sell (or short sale) order means the order will only execute at a certain price or higher. In the event that the price arrives at the limit sell order price, the order is executed.

As a rule, a limit order will be initiated as a good until canceled (GTC) order. LOC orders can't be GTC. They have a limited life and will lapse or be executed on the day they are placed.

A LOC order isn't guaranteed to fill, however the price is controlled.

LOC Order Terms and Procedures

With a LOC order, an investor controls the price they buy or sell a security at. A LOC order is a limit order that is executed at the market's closing price. An investor could pick this type of order since they are utilizing a strategy that expects them to enter a position or price by the day's end, for instance.

They could utilize a LOC to exit trades too, but, since it is a limit order, the order isn't guaranteed to fill, and that means the position could remain open after the market closes.

A LOC order must be presented by a predefined time, for example, 3:50 p.m. on the NYSE or 3:58 p.m. EST on NASDAQ.LOC orders are submitted and executed on a similar trading day. They don't continue to carry over in the event that they are not executed.

A LOC order may be executed on the off chance that the closing price matches the limit order price or better. Partial orders might be filled, contingent upon the brokerage and exchange order allowance.

Illustration of a LOC Order

Expect a trader needs to buy a listed stock at the close today, yet they only need to pay up to a certain price and not higher. They can enter a LOC order prior to 3:50 p.m. EST. Assuming they try to enter an order after that the exchange will dismiss this order type. They can in any case physically buy close to the close in the event that they wish utilizing a traditional limit order or market order.

Say the stock is trading at $25.25 at 3:45 p.m. The trader concludes they will buy up to $25.40 and places a LOC buy order for 100 shares costing that much. At 3:50 p.m. the order is locked in and can't be canceled.

  • If the closing price at 4:00 p.m. is under $25.40, the order will execute and the trader will get their 100 shares.
  • On the off chance that the closing price is above $25.40, the stock price has surpassed the limit, so the LOC order won't be executed and the trader won't get the shares.

Since the order is locked in a short time before the closing price is known, the trader might wind up with a vastly improved price than the current price of $25.25, for example, $25, or even $24.75, yet they will only pay up to $25.40 or anything limit they set.

The limit they set could likewise be below the current price of $25.25. For instance, they could place it at $25, meaning the order will only fill on the off chance that the closing price is $25 or below.

Features

  • Traders might involve LOC's to exploit increased liquidity in an issue right at the close or to lock in the day's closing price.
  • Limit orders control the price that is paid for a security, or what price a security is sold at. The additional "on close" boundary means the order is only executed assuming the closing price is inside the price limit of the order.
  • A limit-on-close (LOC) order is a limit order that will be executed at the market close.