What Is a Box-Top Order?
A box-top order is a buy or sell order made at the best market price.
Understanding Box-Top Orders
Box-top orders execute market orders at the current best price. If the order cannot be completely filled, a limit order is placed for the remaining shares at the price at which the filled portion was executed. A limit order is an order placed to execute a buy or sell transaction at a set number of shares and at a specified limit price or better.
For example, if a trader entered a box-top order to buy 1,000 shares at the current market price of $50, and only half of the shares are traded at that price, then a buy limit order is placed for the other 500 shares. If at any point during the life of the order the price returns to $50, the limit order kicks in and the remaining shares will be traded at $50.
Limit Orders vs. Stop Orders
Limit orders allow an investor to limit the length of time an order can be outstanding before being canceled. Limit orders enable box-top orders to be executed effectively. The execution of a limit order is not always guaranteed, but it does help to ensure that the investor does not miss the opportunity to buy or sell at a target price point. These orders set a maximum or minimum at which a trader is willing to buy or sell a particular stock. An investor can set specific conditions for limit orders, such as requiring that all desired shares be bought or sold at the same time if the trade is to be executed, which is called an all-or-none order.
On the other hand, a stop-loss order ensures that a transaction does not take place at a price worse than the indicated target. It can be used to sell an existing instrument or to enter into a new transaction. With a stop order, a trade is only executed when the security reaches a particular price known as the stop price. For investors who are unable to monitor their stocks for a certain period of time, stop orders are particularly advantageous. Brokerages sometimes even set stop orders at no charge.
While stop orders may not include a brokerage charge, limit orders may carry a higher commission. The advantage of a limit order is that it guarantees a trade will be made at a particular price; however, it’s possible the order will not get executed if the limit price isn’t reached.