Time-in-Force and Special Order Designations
Now that you understand how orders control price, the next layer is how they control time and completeness. These designations determine how long an order stays active and whether partial fills are acceptable.
Time-in-Force Designations
| Designation | Meaning | Key Detail |
|---|---|---|
| Day order | Expires at the end of the trading day if not filled | Default for most orders |
| Good-til-canceled (GTC) | Remains open until executed or canceled by the customer | Firms may set maximum duration policies |
| Immediate-or-cancel (IOC) | Must execute immediately; partial fills allowed; unfilled portion is canceled | Speed-focused; accepts partial execution |
| Fill-or-kill (FOK) | Must execute entirely and immediately or the entire order is canceled | All-or-nothing AND immediate |
| All-or-none (AON) | Must execute in its entirety but does not need to fill immediately | Can wait on the book for a complete fill |
| Market-on-close (MOC) | Executes at or near the closing price of the trading session | Must be entered before the exchange's cutoff (typically 3:45 PM ET on NYSE) |
Exam Tip: Gotchas
- Day order is the default. If no time-in-force is specified, the order expires at the end of the trading day. The exam may describe an order without mentioning a duration and expect you to know it is a day order.
Key Distinctions: IOC vs. FOK vs. AON
These three designations are easily confused on the exam. Focus on two dimensions: must it be immediate? and are partial fills OK?
| Feature | IOC | FOK | AON |
|---|---|---|---|
| Must fill immediately? | Yes | Yes | No |
| Partial fills allowed? | Yes | No | No |
| Unfilled portion? | Canceled | Entire order canceled | Waits for complete fill |
- FOK vs. AON: Both require a complete fill, but FOK demands it immediately while AON can wait
- FOK vs. IOC: Both demand immediate execution, but IOC accepts partial fills while FOK does not
- AON orders do not have standing on the specialist's/Designated Market Maker's (DMM's) book on the NYSE; they are held by the floor broker
Think of it this way: FOK is the most demanding designation: it wants everything, right now, or nothing. IOC is slightly flexible (it will take a partial fill), and AON is patient (it will wait, but still wants the full amount).
Exam Tip: Gotchas
- FOK and AON both require complete fills, but only FOK is immediate. AON can sit on the book and wait for a full fill; FOK cannot.
- IOC and FOK both require immediate execution, but only IOC allows partial fills. If 500 of 1,000 shares are available, IOC fills the 500 and cancels the rest. FOK cancels the entire order.
Not-Held Orders
- A not-held (NH) order gives the floor broker or trader discretion over the time and price of execution
- The customer waives the right to hold the broker liable for missing a specific price
- Typically used for large institutional orders where the broker's judgment on market timing adds value
- Usually expected to be completed by end of the trading day
Exam Tip: Gotchas
- A not-held order is NOT a discretionary order. With a not-held order, the customer specifies what to buy/sell and how much. Only time and price are left to the broker's judgment. With a discretionary order, the broker has authority over the asset, action, or amount.
- Choosing only time or price does NOT make an order discretionary. Discretion requires authority over at least one of the "three A's" (Activity, Amount, Asset).
Spread and Straddle Orders
- Spread order: Simultaneous purchase and sale of options on the same underlying security with different strike prices and/or expiration dates, entered as a single order at a net debit or credit
- Straddle order: Simultaneous purchase (or sale) of a call and put on the same underlying security with the same strike price and expiration
- These combination orders execute both legs together or not at all