What Is an At the Lowest Possible Price Request?
The phrase At the Lowest Possible Price refers to a type of security trading designation that instructs a brokerage to execute a buy order at the lowest price that can be found.
This type of trading designation does not specify a maximum or minimum price at which the order must be filled. Rather, it only instructs the broker to secure the lowest possible price for the security, and to do so as quickly as possible.
- At the Lowest Possible Price is a type of trade execution designation.
- It instructs the broker executing the trade to seek the lowest price possible for the security.
- This type of designation is most commonly used in relatively illiquid markets, such as certain derivative markets or among traders of firms with very small market capitalizations.
How an At the Lowest Possible Price Requests Works
At the lowest possible price requests are more commonly found in markets with limited liquidity or low trading volumes. This is because investors trading securities with lower liquidity have fewer options when it comes to executing a buy or sell order. The market for a thinly traded security is more limited and other parties are better able to demand pricing that may not be ideal for the investor.
While investing in securities in limited markets may bring an investor a higher rate of return than investments made in more developed and liquid markets, the investor does run the risk of not being able to quickly enter or exit the market. In these circumstances, investors often prefer to purchase securities at the lowest possible price because it provides the greatest opportunity for profit while limiting their risk.
Investors who want to further reduce their risk of paying too much for a security can use a Limit Order. This would allow them to specify a maximum, or limit, to the price they pay.
Real World Example of At the Lowest Possible Price
For example, investors looking to trade currency options in exotic currencies (i.e., currencies other than the dollar, euro, pound, or yen) may find it difficult to execute an order if other traders are not participating in the market in large enough numbers.
While the investor may want to execute a buy order at the lowest possible price, it is possible that the investor will have to accept a higher price. Using an At the Lowest Possible Price request ensures that the investor gets a low price, even if it is not as low as they desired.