What is an Order-Sends-Order (OSO)?
An order-sends-order (OSO) is a set of conditional orders stipulating that if one order executes, then the other orders are automatically entered. Among several examples of OSO orders are bracketed buy orders. Experienced traders use OSO orders to mitigate risk and to lock in gains.
OSO orders may be contrasted with order-cancels-order (OCO) conditions that cancel, rather than trigger, additional orders.
- An order-sends-order (OSO) is a type of conditional order in which the execution of a primary order triggers the placement of one or more secondary orders.
- OSO orders can be used to mitigate losses and lock in profits on a new position.
- OSO orders also can be created that take advantage of the position of some stocks as bellwethers for their industries or sectors.
- An OSO is the opposite of an OCO, in which execution of a primary order cancels one or more other orders.
Examples of OSO Orders
In a bracketed buy order, a buy order has a sell limit order and a sell stop order attached, the latter two secondary orders being entered automatically once the primary buy order is executed. The sell limit order gets priced above the buy order and the sell stop order, or stop-loss order, gets priced below the buy order. In this application of an OSO, the trader has set maximum possible gains and losses on his position. Of course, if the primary buy order is not executed for whatever reason, the secondary orders are never entered.
In another example of an OSO, a trader enters a limit order to purchase a particular stock. If this primary order is executed, it will trigger one or more secondary limit orders to buy other stocks, perhaps in the same industry or sector. This OSO also may include the placement of sell limit orders or sell stop orders on one or more of these stocks, as in the bracketed buy order example outlined above. In this scenario, the trader may be anticipating that when a bellwether stock becomes an attractive buy, the same will hold for secondary stocks that are included in the OSO.