All or none (AON) is an instruction used on a buy or sell order that instructs the broker to fill the order completely or not at all. If there are not enough shares available to fill the order completely, the order is canceled when the market closes. An AON order is considered a duration order because the investor provides instructions to the trader about how the order must be filled, which impacts how long the order remains active.
<>Factoring in Technical Analysis>
Many portfolio managers use technical analysis, which is the study of stock price patterns and trading volume, and this strategy may require an AON order. When a stock price trades above or below a range of trading, the price may indicate a future trend. Assume, for example, that a stock trades between $20 and $25 per share for several weeks, and then the stock price increases to $27. Technical analysts describe this trading pattern as a breakout, which means that the stock price continues to increase. The portfolio manager can place an AON order, so that the entire order must fill at the $27 breakout price, which allows the manager to profit from the price increase.
Portfolio managers also use fundamental analysis, which involves the study of a company's financial statements and financial ratios. Managers compare the ratios of a business to similar firms in the same industry, and a ratio can serve as a buy or sell signal. Portfolio managers use AON orders to buy and sell stocks, based on fundamental analysis. Assume, for example, that the price-to-earnings (P/E) ratio for the technology section is 30 times earnings, and that Microsoft's P/E ratio is 20 times earnings ($100 stock price / $5 earnings). Because Microsoft's P/E ratio is lower, the company is generating more earnings per share, which makes the stock's current price more attractive than other firms in the industry. The portfolio manager places an AON order to purchase 5,000 shares at $100 per share since the P/E ratio indicates a buy signal.