What Is a Time-Of-Day Order?
A time of day order is an order type in financial markets that allows an investor to request a specific time of day at which an order will be filled.
How a Time-Of-Day Order Works
Time of day orders are an important tool for day traders and other investors who are trying to time their entry or exit into a stock or other financial instrument. A time of day order is a kind of order type, or a request to buy or sell a stock, bond or other financial instrument that comes with specific instructions. Other kinds of order types include limit orders, stop orders and a stop loss order. Whether or not you are able to make a time of day order depends on the rules of the specific exchange or market you’re trading in.
The types of orders that exchanges offer investors is important, yet average investors don’t always understand the implications of such market structure. The advent of high-frequency trading, for instance, brought attention to the sorts of order types, like “hide not slide,” that were made available to these algorithmic traders. Critics claimed that such order types gave high-frequency traders an unfair advantage.
Time of day orders may appeal to traders who are looking to trade on specific information they believe will be revealed at a specific time. For instance, if you are expecting that the government will announce that the economy shrank in the previous quarter, you may place a time of day order to buy Treasury bills, if you believe that investors will react to the bad news by fleeing to the safety of government bonds.
Example of Time of Day Orders
Let’s say that you want to buy Apple stock because you believe that the recently released iPhone is more popular than either the company or analysts have predicted. You believe that when Apple releases its iPhone sales data the following day, that the stock will jump significantly in price. Because Apple’s announcement is scheduled tomorrow at 2 p.m., you place a time of day order for 1:59 p.m.
Often, time of day orders can be paired with other order types. It may make sense, in the Apple example, to pair the time of day order with an immediate or cancel order. An immediate or cancel order asks that only the part of the order which can be filled is filled, and that the rest be canceled. This may be a good idea, if we expect Apple stock to spike after 2pm, and it would protect you from having part of your order filled at that higher price.