What Is Good This Month?
Good this month orders are limit orders that will be automatically canceled if not executed by the end of the month in which the orders were placed. Good this month is one example of a time directive that can be applied on a wide range of exchanges. Trade requests with such time restrictions are more generally known as time in force orders. Good this month orders are of use to investors seeking to capitalize on end-of-month price increases.
Understanding Good This Month (GTM)
Good this month (GTM) orders are limit orders that are held open until the end of the month in which they are placed. The term can apply to stock, derivative or foreign currency orders and can generally be canceled or modified during the life of the order.
GTM orders are one type of time in force order. Time in force refers specifically to the time between the placement of an order and its execution or cancellation. Time in force has also come to refer to limit or stop orders placed with a time restriction. Day orders are good only for the day in question.
Good until canceled (GTC) orders are left open indefinitely, exposing the investor to significant risk if they do not attach a time limitation to the order. GTC orders often feature a 30-90 day cap. Fill-or-kill means that the share quantity of an order must be satisfied or the order will not be executed. On-open or on-close orders must be executed at either the opening or closing auctions. Any of these timing directives can be combined with price restrictions such as limits or stops to further fine-tune an order to an investor’s specifications.
The End-of-the-Month Phenomenon
Research has shown that stock prices often surge at the end of a month. Two theories exist for this phenomenon. The payday theory points out that employers tend to issue paychecks at the month’s end, potentially fueling a bullish movement. At the same time, many investments pay dividends at the month’s end, leading to further reinvestment or purchases at that point.
Another theory for the end-of-month uptick comes from the trading habits of institutional investors. Fund managers often unload losing stocks and double down on winners in the hopes of boosting monthly, quarterly or annual results.
Whatever the cause, the end-of-month spike has a significantly greater effect upon small cap stocks than on larger stocks. A good this month order can be a useful tool for capitalizing on the monthly rise in share prices.