Ever place an order with a friend going to the donut shop for a coffee and a raspberry jelly donut, but to get an apple jelly donut if the shop has run out of raspberry? Last thing you want is the coffee without the donut.
A Day-Around Order is a similar kind of securities order. It gives a contingency in order to get an execution done, since orders have to be followed explicitly by law, and a previous order must be cancelled before a new order replaces it. If, say you wished to buy 100 shares of a stock with a limit order of $5, but news comes out before the open, and that stock opens at $5.50 and starts to climb, you could put a Day-Around-Order that adds a $5.65 limit for the 100 shares. This allows for the cancelation for compliance purposes, and the execution to be completed so you still get your shares.
A market order could work to get you executed, but then you would automatically get filled if the stock opened perhaps at $6, which might be higher than your acceptable entry point.
Related or Semi-related Video
Finance: What is a market order?3 Views
Finance a la shmoop what is a market order? alright people it's a type of buy
or sell order which simply says I will buy or sell this stock or bond at this
price right now that is whatever price the market is telling me it's worth [Investor discussing market orders]
right now that's my price so the market prices change all the time and yes of
course the broker can choose to look at his screen this minute or that minute or [Broker looking at computer screen]
the following minute and the market will be changing if you're placing the order
during the day so yes there is some discretion in defining exactly what
dollar amounts and penny amounts a market order means but in real life
usually through online portals or even through old-school telephones yes those [Person using an old-style telephone]
things the broker will say something like yep I see coca-cola quota here at
42.48 that's market right now you want it and if you want to sell well then you [Woman selling bonds while on the phone]
mumble something like go ahead and just so you know the kissing cousin of a
market order is a limit order like an investor might tell the broker give me a
42.50 limit on that coke sale if the stock never hits 42.50 like it's
below at 42.49 doesn't do it well then no sale ever happens and the [Coca cola stock price graph stamped with no sale]
owner of those coca-cola shares well they just keep them if the stock
suddenly pops and it gets there then blam the shares have been sold well in
practice most relatively sophisticated buyers and sellers put in limits like
limit orders not just naked market orders even if they are below what the
market currently floats because flash crashes happen all the time it seems
these days and in one fleeting moment shares of coca-cola could suddenly [Coca cola share price drops]
plummet to 34.12 a share and if the seller has a market order in while those
shares will transact or be sold at 34.12 even though 15 minutes later the markets
back to its 42.50 a share pricing so you can get really heard if you rely on
the market being a stable and rational so vanilla pure market orders can be a [Man with pigs head riding a bike]
dangerous thing be careful just ask the little piggy you know who went to market
Up Next
What is Good ‘Til Cancelled (GTC)? GTC orders are trade orders that may be filled at any time unless the investor cancels it. Good til cancelled...
An unsolicited order is an order to buy or sell a security demanded by the client.
What is an All or None Limit Order? An all or none limit order says the investor wants their order filled entirely or not at all. An investor may r...