Limit-On-Close Order Terms and Procedures

With a limit-on-close order, an investor controls the price they buy or sell a
security at. A LOC order is a limit order that is executed at the market’s closing
price. An investor might choose this type of order because they are using a
strategy that requires them to enter a position or price at the end of the day, for
example. They could use a LOC to exit trades as well, but because it is a limit
order the order is not guaranteed to fill, which means the position could
remain open after the market closes.

A LOC order must be submitted by a specified time, such as 3:50 p.m.

on NYSE or 3:58 p.m EST on NASDAQ. LOC orders are submitted and executed
on the same trading day. They do not continue to carry over if they are not
executed.

 
A LOC order will only be executed if the closing price matches the limit order
price or better. Partial orders may or may not be filled depending on
the brokerage and exchange order allowance.

Example of a Limit-On-Close Order

Assume a trader wants to buy a listed stock at the close today, but they only
want to pay up to a certain price and not higher. They can enter a LOC order
prior to 3:50 p.m. EST. If they try to enter an order after that the exchange will
reject this order type. They can still manually buy near the close if they wish
using a traditional limit order or market order.

Say the stock is trading at $25.25 at 3:45 p.m. The trader decides they are willing
to buy up to $25.40. They place a LOC buy order for 100 shares $25.40. At 3:50
the order is locked in and can't be canceled.

 If the closing price at 4:00 p.m is less than $25.40 the order will execute
and the trader will get their 100 shares.
 If the closing price is above $25.40, the stock price has exceeded the limit,
so the LOC order will not be executed and the trader will not get shares.

Since the order is locked in 10 minutes before the closing price is known, the
trader may end up with a much better price than the current price of $25.25, such
as $25, or even $24.75, but they will only pay up to $25.40 or whatever limit they
set.

The limit they set could also be below the current price of $25.25. For example,
they could place it at $25. It will only fill if the closing price is $25 or below.
SPONSORED

Invest in the brands you love

You use world-class brand names each and every day, and you already know
their products well. What if you could profit from all that knowledge? “Invest in
what you know” is a notorious investment strategy and a great way to get started
in stock investing. Find out how. Your capital is at risk. Other fees apply. For
more information, visit eToro.