What Is Time in Force? Definition and Examples
Time in force (TIF) is a stock investing term referring to the length for which a trading order is good. Although casual or buy-and-hold investors may not use time-in-force stock limits, they’re an important tool for active traders.
Understanding different time-in-force options may help you close out positions more efficiently.
Key Points
• “Time in force” is a stock investing term that defines how long a trading order remains active before expiring.
• Different types of TIF orders include day order, on-open order (OOO), market on close order (MOC), and good ’til canceled order (GTC).
• Understanding these orders helps active traders manage trade executions and avoid unintended trades.
• Casual or long-term investors typically do not use TIF orders.
What Does Time in Force Mean?
Time in force is a directive, set by a trader, that defines how long a trade will remain open (or “in force”) before expiring. Options traders and other active traders can set an appropriate end date for their trades to help prevent unintended executions.
Without an end date, an order could be filled at an unfavorable time or price, particularly in markets that move fast. This is especially true for investors employing day-trading strategies and taking advantage of volatile market conditions with rapidly changing prices.
Basics of Time in Force
Before you place a time-in-force stock order, you’ll want to make sure that you understand exactly how they work. As with options trading terminology, it’s important to understand the language used to describe time-in-force orders.
Recommended: A Guide to Trading Options
Types of Time in Force Orders
Time in force is not a specific kind of stock market order. Instead, the phrase refers to the collection of order types that set how long a trade order is valid — or “in force” — in order to pursue potential investment opportunities. If you are considering a buy-to-open (purchasing a new position) or buy-to-close order (closing an existing position), you can also specify the time in force for either of them.
There are several kinds of time-in-force orders, although not every broker or dealer supports them.
1. Day Order
Of the different time-in-force orders used in options trading and other types of trading, day orders are the most common. With a day order, your trade remains open until the end of the trading day. This may happen if the order’s pricing conditions were not met (such as the price on a limit order). If your order has not been executed at the close of the day’s markets, it will expire.
With many brokers, including online brokerage firms, day orders represent the default option. Thus, this is the time in force order with which most people are likely familiar.
2. On-Open Order
Depending on the types of order that your broker or dealer offers, there can be two different types of options for trades executed at market open: MOO and LOO.
A MOO is an order filled when the market opens, at the prevailing opening price. With a LOO order, you can set a limit price for the highest price you’ll pay or the lowest price at which you’ll sell. If the market opens within the constraints of your limit order, it will be executed. Otherwise, your broker will cancel the LOO order.
3. Market on Close Order
A market-on-close (MOC) order requests the sale or purchase of a security at the final closing price of the trading day. These orders may help you avoid intraday trading volatility or simplify trade execution without having to closely monitor the market for fluctuations.
If your brokerage offers MOCs, they may have a cutoff time by which you need to enter in any MOC orders.
Recommended: Buy to Open vs. Buy to Close
4. What Is Good ‘Til Canceled (GTC)?
As its name suggests, a good-til-canceled (GTC) order is a type of time-in-force order that remains in force until you proactively cancel the order or it is filled. Depending on the type of trading or options trading strategy you’re employing, a GTC order may be worth considering if you’re waiting for the underlying stock price to move. Many brokerages will restrict the number of days a GTC order can remain open, often to 90 days.
The maximum potential gain for these orders is the difference between the limit price and the original purchase price, so long as the stock moves in your favor and the trade executes. If the stock fails to reach your target and continues to decline, you may face missed opportunities for smaller gains or risk holding a depreciating asset, leading to unrealized losses.
5. What Is Fill or Kill (FOK)?
FOK orders ensure that trades are executed in full and immediately. If that cannot happen, the order is canceled completely. This helps traders avoid partial fills, which may result in executing orders at differing prices, or with additional transaction fees.
Examples of Time in Force
You currently own shares of a stock that announced earnings last night, and you’re considering liquidating (or selling) your position. You’re not sure how the market will react to the earnings news, so you place a LOO order for more than you paid per share. If the stock opens at this number or higher, your trade will execute. If not, your broker will cancel it.
If the stock’s shares have been rising all day, but you anticipate that it may open at a lower price, you might use a MOC order to try to sell at the end-of-day price.
The maximum potential gain from a market-on-close order depends on how much the stock’s closing price exceeds your original purchase price. For instance, if you bought shares of a stock that closes at an increase in price, your maximum potential gain would be the difference in the price per share (before fees and taxes).
The maximum potential loss can occur if the market moves against your position. In the case of a long position, your loss would be the difference between the original price paid and the lower closing price if the price drops below your purchase price. For a short position, your loss would be the difference between the sale price and the higher closing price, if the closing price rises above the price at which you sold. This loss could be unlimited.
If you prefer to sell the stock when it hits a specific price in the future, you might choose to set a good-til-canceled order as part of your strategy. With a GTC order, you can specify a limit price, ensuring that your trade will only execute if the stock reaches or exceeds that price. Although GTC orders remain active until they are executed or canceled, most brokers set a maximum duration (around 90 days) before an order will expire if it isn’t filled.
This strategy may help investors take advantage of favorable price movements while maintaining flexibility. However, it also carries the risk of missing your target price due to market volatility or unexpected conditions.
Time in Force Day Order vs On-Close Order
Day orders and an on-close order are similar, but they have some important differences. A day order is one that is good for the entire trading day, up to and including close. If you’re placing an order in the middle of the trading day and do not need it to execute at a specific time, this is the type of order you’d use.
Alternatively, an on-close order (either market on close or limit on close) is only good at the close of the trading day. The intent of an on-close order is to execute at the final trading price of the day. If you place an on-close order in the middle of the trading day, it will not execute until the end of the trading day, regardless of its intraday price.
Using Time in Force Orders
How you use the different time-in-force orders will depend on how you buy and sell stocks or execute your options trading strategy. Most buy-and-hold investors won’t use time-in-force orders at all, but if you’re using a more complex strategy, such as buying to cover, you may want to have more control over how and at what price your order is executed.
The Takeaway
Time-in-force orders can be a part of day traders’ execution of specific strategies. It determines how long a trade will remain open before being canceled. It is uncommon for long-term investors to use time-in-force orders.
Investors who are ready to try their hand at options trading despite the risks involved, might consider checking out SoFi’s options trading platform offered through SoFi Securities, LLC. The platform’s user-friendly design allows investors to buy put and call options through the mobile app or web platform, and get important metrics like breakeven percentage, maximum profit/loss, and more with the click of a button.
Plus, SoFi offers educational resources — including a step-by-step in-app guide — to help you learn more about options trading. Trading options involves high-risk strategies, and should be undertaken by experienced investors. Currently, investors can not sell options on SoFi Active Invest®.
FAQ
What happens if my order isn’t executed before it expires?
If your order expires without being executed, it means that the price conditions you set were not met during your chosen specified time period. You will need to place a new order if you still want to trade.
How do I decide which Time-in-Force option to use?
Your choice depends on your trading strategy. For instance:
• Day orders are for keeping your trade active during the current trading day.
• GTC orders allow you to execute trades that happen at a specific price level, and orders can stay open for days or weeks.
• MOC orders are designed for executing trades at the end-of-day closing price.
Are Time-in-Force orders only for active traders?
Active traders frequently use time-in-force orders to manage trades in dynamic markets. While less frequent, these orders can also play a role in long-term investors’ strategies, particularly if they want more control over trade execution timing and price conditions.
Can I change the Time-in-Force setting after placing an order?
No. Once you’ve submitted an order, the time-in-force setting cannot be modified. If you want to adjust the duration, you’ll need to cancel the original order and create a new one with the updated time-in-force option.
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