Contingency Order

Categories: Regulations, Trading, Stocks

A stock is trading at the market sell price of $10.50. The market buy price is $10.49. You aren’t willing to buy the stock unless it’s trading at $10.45 per share. So you'll put in a buy limit order...a type of contingency order that states you will only purchase the stock if it hits a market sell price of $10.45. This is considered a contingency order, because it requires that a certain condition must be met before a trade can be executed.

The actual orders could be filled below that buy limit threshold...say, $10.43 per share if there were a sudden drop in the price. However, it will never execute outside of the parameters set by the trader.

There are other examples of contingency orders. For example, an All-or-None order (AON) is a situation where a buyer wants to purchase all of the shares at once, or no trade will be executed. This ensures that a complete order is made, and that the purchases are not broken up into various chunks, potentially leaving the order incomplete. The same could be said for an AON sell order, where the seller wants either all of the stock to be sold in a single block...or no shares to be traded at all.

Related or Semi-related Video

Finance: What is Contingent Liability?4 Views

00:00

Finance allah shmoop what is contingent liability All right you

00:08

know what a liability is right It's a debt it's

00:11

a promise you've made that you need to fulfill teo

00:14

pay someone and fulfilling it can be done with cash

00:18

or ah promise of delivering inventory or after you've sold

00:23

the home to the joneses An interesting family with oddly

00:26

large foreheads you know delivering good title to the home

00:31

to them right So you're fulfilling liability of producing your

00:35

home so what's a contingent liability Well think of it

00:38

is a call option or a put option on a

00:41

security A contingent liability is a derivative of some other

00:46

underlying being like another liability Well the most common contingent

00:51

liability would be a filed lawsuit that is more than

00:54

just an ambulance chasing securities lawyer hoping to get a

00:58

quick five hundred grand to go away google might be

01:01

willing to pay three billion dollars toe by ring That

01:04

wireless doorbell company started by some weirdo contingent upon ring

01:09

properly defending its lawsuit from honeywell which claims that they

01:14

own the patents on the process while the financial outcome

01:17

of that lawsuit is a contingent liability to the company

01:22

Ring and the outcome of the joneses moving into town

01:25

well is a worldwide dominance and the enslavement of all

01:28

human I mean that's what's at stake their people But 00:01:31.39 --> [endTime] not least they keep their front lawn looking nice

Find other enlightening terms in Shmoop Finance Genius Bar(f)