DEFINITION of 'Contingency Order'

An order that is executed only when certain conditions of the security being traded, or another security, have been fulfilled. Such prerequisite conditions range in scope and depth. In a simple case, a contingency order may depend on the potential purchaser's ability to sell a different security in his or her portfolio to free the funds to make the purchase. In a more complicated situation, an options contingency order's execution may depend on the share price of the options' underlying stock

BREAKING DOWN 'Contingency Order'

A stop-loss order can be viewed as a contingency order because it does not become a market order until the price of the stock being sold reaches a predetermined price. This type of order is very useful when applied to the sale or purchase of options.

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RELATED FAQS
  1. What kinds of derivatives are types of contingent claims?

    Read about contingent claim derivatives, such as options contracts, whereby the payout of the transaction is dependent on ... Read Answer >>
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    Buy and sell trades with market orders at the present stock price and execute limit orders if the stock price falls within ... Read Answer >>
  3. How are contingent liabilities reflected on a balance sheet

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