Types of Futures Contract Orders and How They Are Used for Best Results

There are several different types of futures orders that may be used for entering into a futures trade.  Each type of futures order is a series of instructions that must be followed.  It has to contain the specific entry price and other trade conditions that must be met in order to enter a futures trade.  Please see our article on Placing Futures Orders for more information on what goes into a futures order.

Futures traders can choose a type of futures order that meets his or her needs and market conditions that are present at the time the order may be placed.  Not all types of order are valid on all exchanges and not all types of futures orders are accepted by all brokers.

It does not matter if you are going long or short the market, all orders are used the same way.  Your only concern should be using the type of order that best suits the current market conditions and your particular needs for the trade you are attempting to enter.  All orders will expire worthless at the end of the day if they have not been filled, unless you specify that the order is Good Till Cancelled or GTC.  Two other options to a GTC order might be Good Through the Week or GTW and Good Through A Particular Day or Date referred to as GT Date.

Here are the different types of Futures Orders.  This is a list of the most commonly used types of futures orders.  There are other types that are more specialized.  Your futures broker will inform you if you have to use one of those types.  For most of use, this list will cover most of the futures trades that we will get ourselves into.

Market Order

A Market Order is executed at the best possible price as soon as the order reaches the floor broker on the trading floor.

Limit Order

A Limit Order tells the floor broker the worst price that the trader will accept on the futures order to be executed.  It is also understood that the trader will accept a better price than the price on the futures order if the floor broker can execute the futures order at the better price.

Stop Order

A Stop Order is an order to buy or sell an existing futures position at the market but only after the specific stop price has been reached.  Using a stop order is no guarantee that your order will be filled at the specified price.  In a fast moving market you will be filled at the best possible price after your stop price has been hit.

Market if Touched Order - MIT

A Market if Touched Order is an order to buy or sell at the market only if the market reaches the price you specified on your futures order.  This price is not a limit price, it is a trigger price.  If the market reaches your price the floor broker will treat it as a market order, but not until then.

By using a Market if Touched Order the futures trader is telling the floor broker that he is willing to buy or sell at any price once his target price has been reached.  With a limit order the trader is specifying an absolute limit the he is willing to accept on his futures order.

Stop Limit Order

A Stop Limit Order is used in much the same way as a regular stop order except that the execution of the transaction is restricted to the limit price or better.  In a fast moving market it may not be possible for a floor broker to execute the stop limit order since the stop limit order becomes a limit order and not a market order when the market reaches the specified price.

Market on Close Order

A Market on Close Order is an order that is executed, prices permitting, during the official closing period for a futures market.  With a Market on Close Order, you will be filled at the end of the trading session, but the price you are filled at may not be the price of the last sale.  It only has to be within the range of closing prices during the of the official closing period of the contract month you are trading in.

Stop Close Only Order

Like the Market on Close Order, Stop Close Only Order are also only executed during the official closing period of a futures market.  The difference is that Stop Close Only Order are triggered only during the closing period the same way a Limit Order is triggered during a regular trading session.

Opening Only Order

An Opening Only Order is only good following the official opening of trading of a futures contract.  If the Opening Only Order is not filled during this period it is immediately cancelled by the floor broker.  If it is executed it may not be at the price of the first trade, just as long as it falls within the range of prices during the official opening for that delivery month.

Discretionary Order

A Discretionary Order is an order where a fill price is given and then an amount is specified above or below the entry price that the trader is willing to be filled at.  The floor broker will attempt to fill at the specified price, but if that is not possible he knows that he has some room to work to get you filled at the next best possible price.  This type of order is generally used in thin, or lightly traded markets where the floor broker may have to work the order.

Not Held Order (NH)

A Not Held Order lets the floor broker know that the trader is aware that there are some circumstance that may make the filling of this order difficult, or that the he would like the floor broker to make some extra effort to fill this order.  With this type of order, the floor broker knows that he will not be held accountable if the effort was unsuccessful.  There are some types of orders that require particular attention and they will only be accepted by a floor broker if they are marked Not Held.

Fill Or Kill Order (FOK)

A Fill or Kill Order is an instruction to the floor broker that the futures order must be executed immediately or cancelled.  A Fill or Kill Order can either be filled in whole, or in part.  A report on the part of the order that was successfully executed must come back immediately and the outstanding balance of the futures order must be cancelled. 

Different exchanges have different procedures for Fill or kill Orders.  Your broker can let you know what the rules are for the exchange you are trading on when you place your order.

Scale Order

A Scale Order is used to enter a large position in increments.  The initial order will be a specified number of contracts bought or sold "at the market" and the balance of the order will be treated as a series of limit orders until the total number of contracts specified in the futures order have been purchased.

Spread Order

A simple Spread Order involves two positions, one long and one short. They are taken in the same commodity with different months, called a calendar spread, or in closely related commodities.  A Spread Order is used to establish, or offset, both the long and short legs of the spread position with a single order.

Switch Order

A Switch Order looks like a Spread Order but it is used to move an existing futures position from one delivery month to another.  The term Switch is used instead of Spread to separate a Switch Order from a Spread Order and let the brokerage house know that one side of the order is a new position and the other side is an offset.

Exchange for Physicals (EFP)

An Exchange for Physicals is a transaction where one party buys the physical commodity and sells (goes short) the underlying futures contract.  The other party in the transaction sells the physical commodity and buys (goes long) the underlying futures contract.  These transactions are arranged outside of the futures exchange, in accordance with exchange rules, and then be submitted to the futures exchange for clearing.

Cancel Order (CXL)

A Cancel Order can be applied to any order that has been entered if it has not already been filled by the floor broker.  If the order has not been filled the cancellation will only be confirmed when the floor broker reports back "You're Out".  If the floor broker has already filled the order then he will report back "Too late to cancel".  If the trade has already been filled it is the responsibility of the customer to get out of the trade.  The floor broker cannot be held liable if he was unable to cancel an order once it was  filled.

Cancel Former Order (CFO) or Cancel and Replace Order

A Cancel Former Order, or Cancel and Replace Order, is used when a trader wants to change an order that is being held by the floor broker, or to replace the existing order with a new order.  This type of order is used to avoid both the new order and the existing order being filled at the same time.  This way both orders are combined into one order and if the original order has been filled already, the new order will not be executed.  If the original order has not been filled, and it can still be cancelled,  then it will be replaced by the new order.

One Cancels the Other - OCO

An One Cancels the Other Order is an order that combines two separate buy or sell orders into a single order.  If the floor broker fills one of the orders he will cancel the order that was not filled.