What Is Away-from-the-Market?
An away-from-the-market order is a type of limit order in which the amount stipulated for execution differs from the current price of the security. With a buy limit order the price is lower than the current market price while with a sell limit order, the price is higher.
- An away-from-the-market order is a type of limit order for a security, in which the amount stipulated for execution differs from the security's current price or quote.
- With an away-from-the-market order to buy, the price is lower than the market quote while with an away-from-the-market order to sell, it's higher than the current market price.
- An away-from-the-market order, if executed, would necessitate a move in that security's price in the direction that the order was placed.
- An away-from-the-market order that's not filled may lead to a wider bid-ask spread for that security.
Away-from-the-market refers to orders that are entered at a price that's not immediately available—that is, when either buy or sell price deviates from a current market quote for that particular security. The expression applies in two basic types of scenarios:
- if the bid on a limit order is lower than the current market price, then an away-from-the-market order issues instructions to buy at a price lower than the current market price
- if the ask on a limit order is higher than the current market price, then an away-from-the-market order issues instructions to sell at a price higher than the current market price.
For example, a limit order to buy 100 shares of Acme United Corp. (ACU) at $28 is away-from-the-market since the stock is presently trading at $40 per share. Similarly, a limit order to sell 100 shares at $46 is away-from-the-market when shares are currently trading at $40.
An away-from-the-market order, if it is executed, would necessitate a move in that security's price in the direction that the order was placed. In other words, a sell limit order higher than the market would only be filled if the market price moved higher, and vice versa. An away-from-the-market order that is not filled could lead to a wider bid-ask spread for that security.
Away-from-the-market limit orders are typically held for later execution unless specified as fill or kill (FOK) orders, which are orders that must be completed right away ("filled"), or they will be canceled ("killed").
Along with FOK, there are other conditions for execution you can put on your order. They include:
- Good-'til-Canceled (GTC). A GTC order keeps the order open indefinitely until it is executed or canceled. (This is generally a default position for away-from-the-market orders.)
- Immediate or Cancel (IOC). With an IOC order, all or only a portion of the order can be executed. Any portion of the order not immediately completed is canceled.
- All or None (AON). An AON order is a condition that mandates either the entire order is filled or no part of it.
Like all limit orders, an away-from-the-market order is placed with a brokerage, which executes the buy or sell transaction. The limit order involves a pre-determined number of shares with a set limit price that must be met or exceeded. Limit orders set parameters that give the investor an extra level of control since it allows them to define a price, along with the period of time in which an order can be in progress and pending before it will be canceled.
Brokers usually execute limit orders on a first-come, first-served basis. Even if the stock reaches the specified limit price, your order may not be filled, or it may be only filled in part—because orders ahead of yours have used up the availability of shares at the limit price.
A limit order is a good option if there is a specific price that you want or need to get. It's also appropriate when you think you can buy at a price lower than—or sell at a price higher than—the current quote.
When you place an order of this type, there is no guarantee the order will be executed, and there is a possibility it will never be executed. Generally, limit orders will remain open until the security reaches the designated limit or the investor cancels the order.
However, if the order does go through, you are guaranteed to get at least the price you specified when you put the order in place. Or maybe even better.