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Thread: How best to enter a longer term stock sell order

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    Default How best to enter a longer term stock sell order

    Suppose you are doing a position trade, and wish to sell it out at some point, at a price that is a bit away from today's market price. In such a case, a day order is not in order, as the price is not expected to hit today, or anytime soon. A day order lasts only for - that one day.

    Before we zero in on exactly what kind of order is needed, we must differentiate between the different markets where stock trades may be filled. First off, there is the regular market, open from 6:30am to 4pm EST. Most stock orders are filled there. But there is also Extended Hours trading both in the pre-market (typically open for most retail buyers from 4am to 6:30am EST, although some traders have access to the pre-market starting as early as 4am EST), and in the After Hours (AH) which is from 4pm to 8pm EST.

    When it comes to selling a stock far in the future, in general you will use a Good 'Til Cancelled (GTC) order, which is typically good for 60 days. For example, today NFLX is trading at under 500. If I want to sell some of my NFLX shares at 528, I would enter a GTC to sell at 528.

    However, within a GTC, at least with some trading accounts such as at TDAmeritrade, is the option to have the GTC executed only in the regular market, or in either the regular market or the AH, known as a GTC + Extended order. With other trading accounts such as E*Trade, a GTC order will be executed only during the regular market and there currently is no GTC + Extended option.

    Now, oftentimes, the way to go is with a GTC + Extended order. After all, if your goal is to sell a stock at a given price, at for example 528 for the mentioned stock NFLX, then you shouldn't care if it is executed in the regular or extended market. And in fact, sometime a stock will run up higher in the extended market than it hits in the regular market. For example with TSLA, it ran to the 530s on August 31, 2020, in the pre-market, but didn't get quite that high at any point that day in the regular market, and did not get back above 500 for over two months. So, if all you care about is getting executed at a certain price, if given the option, enter a GTC + extended order and forget about the stock. When it hits your target, whether in the regular or extended markets, it will sell.

    But there are situations where a regular order will be called for - excluding the extended hours. This is where, there might be some intervening event, expected (as in scheduled) or not, that might cause the stock to gap up rapidly before the market's open. In such a situation, unless your sell order price is really far out of the money and is in anticipation of just such a runup, you might sell yourself short with a GTC order that is for example only twenty or so points out of the money.

    With stocks like NFLX, AMZN and TSLA, there is both a history of stock splits, and with AMZN, it has been so long since a split that many anticipate one soon. If any of these stocks split, the price will rocket in the extended hours because announcements like these are always made before or just after the regular market. As well, earnings - these happen for most Nasdaq stocks after the bell - and this might send a stock rocketing too. This is why, if you have a GTC WITHOUT extended hours sell order in place, and you monitor the stock closely, you could cancel the order during the extended hours (just be sure to do it not too close to the opening bell if you cancel it in the pre- because it typically takes a few minutes at least for such orders to cancel out) and then ride the stock to an even higher price than your original order on the good news.

    So, in short, for most stocks, most events, a GTC + Extended order is fine, including if all you care about is getting your sell order filled eventually, and don't care what happens after that. But, if you wish to hold some control over the sell price in case of some fantastic event like a stock split or an earnings blowout, leave the "extended" portion of the GTC order out - and keep a daily watch on the stock. If something happens and it rockets in the extended hours, consider cancelling the GTC sell order or changing its sell price. Just be aware - with many trading platforms it might take a bit to cancel out a GTC order and it might not even cancel out to the point where you may replace it with an extended hours new sell order in time to take advantage of that particular extended hours session. But at a minimum, you should be able to exercise control and cancel a GTC within any extended hours session.

    Happy trading!
    Last edited by MDawg; 12-02-2020 at 07:59 AM.

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