What Is At-or-Better?

Summary:

At-or-better is a type of limit order that can help traders buy or sell a financial asset while maximising their profits. This blog will outline all the pertinent details of an “at or better” order for your understanding. 

When it comes to order execution in financial trading, “at or better” refers to a commonly used condition or instruction. With at or better, the trader implicitly states that the trade should only be executed “at” a certain price or at a price that’s “better”. At or better is quite frequently used to maximise gains while entering an order to purchase or sell a financial instrument. 

How does “at or better” work?

Here's how the "at or better" order works:

• At the Specified Price: As cited in the introduction, if a trader specifies a certain price for the “at or better” order, then the trade is executed either at that exact price or at a price that’s considered more favourable. For a sell order, this will mean selling the asset at or above the specified price. For a purchase order, this means buying the asset at or lower than the specified price. 
• Better Price Execution: This term emphasizes the openness of a trader to a more favourable price than initially specified. For example, if a trader places a limit sell order with an “at or better” condition at INR 100, then it means that the trader is willing to sell off the asset at INR 100 or a price higher (and hence more favourable) than that. 
• Flexibility in Execution: For traders, “at or better” bestows them with substantial flexibility in the trade execution process. They can benefit from movements in the asset’s price in the market. This is especially true in volatile markets with rapid asset price movements. In such cases, “at or better” orders ensure the best possible asset price for the traders. 
• Limit Orders: “At or better” is often complemented by limit orders. On their own, limit orders specify a price at which an asset can be purchased or sold if a better offer doesn’t come along. Traders often add an “at or better” clause to limit orders to reinforce their desire to execute the trade at the specified price, or a more favourable one. 

Examples of “at or better”

Let us explore a few examples to understand this better. 

• Sell Limit Order: Let’s assume a trader has placed a sell limit order for 100 shares of a stock. The limit price has been set at INR 50 “at or better”. This means the trader wishes to sell the shares at INR 100 or a price that’s more than INR 100. 
• Buy Limit Order: Conversely, if a trader places a buy limit order for 100 shares of a stock at a limit price of INR 100 “at or better”, this means he is only willing to purchase the stocks at INR 100 or a price that’s lower than INR 100. 

In short, at or better are a type of limit orders that can ensure investors maximise their benefits and mitigate losses. Just like limit orders, there are other kind of orders in a market. Let us explore them here. 

Types of orders in trading

• Market Order: This order instructs to purchase or sell off a security immediately at a market price that’s the best available currently. These are executed immediately, without guaranteeing a specific price. 
• Stop Order (Stop-Loss Order): This is helps in limiting any losses or protect your profits. Placing a sell-stop order below the current market price makes it a market order to sell if the specified price is reached or falls below it. A buy-stop order changes to a market order to buy when the specified price is reached or exceeded after being placed above the current price.
• Limit Order: This instructs a purchase or sale of a security at a specific price, or at a better price if available. The execution of a buy-limit is done at the specified price or a lower price. Alternately, the execution of a sell-limit order is done at the specified price or a price that’s higher. Even though there is more control over the execution price, the execution is not guaranteed if the specified price is not reached.
• Stop-Limit Order: A stop-limit involves two prices, the stop price, and the limit price. The order morphs into a limit order when the asset reaches the stop price. It gets executed at the specified limit price or a price that’s better. 
• Trailing Stop Order: This dynamic stop order automatically adjusts itself when the market price moves favourably. It can lock in profits and allow for potential further gains. If it’s a sell-trailing stop order, the stop price is set at a specified amount or a percentage below the current market price, adjusting itself upward with an increase in the market price. For a buy-trailing stop order, the stop price is more than the current market price and adjusts downward with a price decrease.

In Conclusion

"At or better" gives traders a sense of control over the price at which orders are executed. This way they can potentially benefit from the rapid price shifts in volatile markets. Traders interested in exploring “at or better” must learn the ropes before having the best chances of making profits.