FOK is an acronym for fixed on close, a type of order that allows for the execution of market orders immediately before the market day’s close.
Similarly to IOC orders, they are intended to be executed during regular trading hours.
However, unlike traditional open or closed orders, there may not be time to execute them after the markets have closed if they aren’t filled by 4:00 PM EST.
It means you should always use discretion when using this type of order.
It’s simple: if your order doesn’t get executed immediately, then it gets cancelled. If price movement doesn’t happen fast enough, then all of your investment can be lost – just like that.
However, with FOKs, the order only stays active for one second, which prevents an order from sticking around unless it’s happening incredibly quickly.
As a result, FOK orders experience a high percentage of executions and a low percentage of order cancellations.
Advantages and disadvantages
Because market orders can result in slippage or being filled at prices far away from what would have been ideal, many traders use FOKs as a way to minimize some of those risks.
Additionally, some investors may be more comfortable using this type of order since they know there will be time for the market to fluctuate and provide them with more advantageous pricing if their orders aren’t filled during regular hours.
On the other hand, regardless of whether you use FOK or other market orders, there is always a chance these orders won’t be filled at all – especially on days with low volume, after big news announcements or when prices are rushing in one direction.
Some brokerages charge extra fees for placing FOKs and may only allow such trades on select stocks – so it’s essential to understand which you are using and where to place them.
Different orders can help minimize slippage or be filled at prices far from the ideal price.
Brokerages may charge extra fees for placing FOK and only allow such trades on specific stocks.
So it’s essential to understand which you are using and where to place them.
When is the best time to use FOKs?
Because folks prioritize being filled during market hours, they can use them any day of the week as long as there is an active market.
However, this type of order may not be ideal during volatile trading and could potentially execute your order without providing you with any advantage from the price fluctuations.
Additionally, some investors don’t like using FOKs because they may prefer to monitor their portfolios and have discretion when deciding when and where to place orders.
Where can I place FOKs?
In terms of where you can place FOKs, these trades are typically only allowed on select stocks. Some brokerages may also charge extra fees for placing FOKs.
To determine what types of orders your brokerage accepts, whether there are fees associated with these transactions and which securities this type of order is allowed on, be sure to visit your brokerage’s website or speak with a customer service representative.
- FOK stands for fixed on close, an order type that allows executing market orders immediately before the close of the market day.
- If you see the abbreviation FOK on the options quote, it indicates that you will be filled at the asking price if your order is executed.
- FOK is often used when you are out of money regarding various options strategies.
- Complicated options trading strategies which include multi-leg positions will involve this type of abbreviation. There’s no benefit in having more than one transaction for a single contract, so it just makes sense that all legs would need to be filled or killed simultaneously.
- Market orders may result in slippage or being filled at prices far away from what would have been ideal, so many traders use FOK as a way to minimize those risks.
Link to US stock for more information.