The 3Dimensional Trading Breakthrough

Brian Schad
Example #6 - Order Cancels Order/One Cancels Other/OCO
(offsetting a futures position): I would like to sell back two March
S&P’s at a price near 1251.10 above the market (if reached) for
a profit, or if price goes against me to 1237.10 as a “protective
stop”:
“This is an O-C-O order for account #12345, sell back two March S&P’s at 1251.10
market-if-touched, O-C-O, 1237.10 stop.”
Brian: I have to say, this last order is probably the least one ever used, and also the
most complicated. I personally use it almost every time I day trade the fast moving
S&P 500 Index! Once I am in the S&P 500 market, I will place two orders thereafter
- an order to get out market-on-close, and an order to get out if a certain price is
reached as a protective stop. Since I have placed an OCO order, I don’t have to
worry about getting “double-filled” in case the market abruptly turns the other
way.
Host: Does this mean your broker actually cancels the other order “working” in
the market?
Brian: Almost. My broker instructs the order clerk on the trading floor to cancel
the second order immediately once the first of the two orders is filled. It’s a very
valuable order that few traders take advantage of. It’s not primarily for day traders
either!
I have a sample order ticket (in the appendix next page over) that is filled out by
our brokers each time we place an order in the market. This may help explain why
orders to our broker need to be routine and regimented. Let’s take a look at this
together:
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