IG has introduced Limits and Limit orders to its OTC, or over-the-counter options trading, which will be available to both CFD and spread betting clients using IG’s desktop platforms or the firm’s mobile trading apps.
A limit can be thought of as the maximum or minimum price you are prepared to accept to achieve the execution of an order. So for example if you have 5 lots of XYZ Ltd 123 calls to sell, but you want to sell them at a better price than the current bid on the screen, of 100p per lot.
You might place an order to sell 5 lots of XYZ 123 calls at a Limit of 105p.
The order instructs your broker to sell the position, but only if they can achieve a price of 105p or better.
What are Limit Orders?
A Limit order is an order on instruction to open a position at a price that is better, or more advantageous, than the current bid-ask spread in the market.
So for example you may be interested in DEF plc 456 puts, which are currently priced at 110p to 112p.
Your option model tells you that they are only worth 108p per lot but at that price, they represent an attractive opportunity.
So you place a Limit Order to buy 5 lots of the DEF 456 puts at 108p, and if the price falls to or through your level your order should be executed.
Not exactly cutting edge
This added functionality will no doubt prove useful to IG’s option trading clients, who will no longer have to monitor price movements continuously before they can submit an order for execution at their preferred price level.
This is not exactly cutting-edge stuff, and I for one find it surprising that these relatively simplistic functions haven’t been part of the IG options trading platform for years.
IG group recently announced that it would shortly launch the tastytrade options brand in the UK.
tastytrade is a big noise in the US exchange traded options market, and IG Group paid a billion dollars to acquire the business back in 2021.
I can only hope that tastytrade will bring a greater degree of sophistication to options trading at IG’s UK operations and that some of that sophistication will rub off onto its OTC options offering.
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