Cl,apter 1: Definitions 33 
Market Not Held Order. The customer who uses this type of order is giv­
ing the floor broker discretion in executing the order. The floor broker is not 
held responsible for the final outcome. For example, if a floor broker has a "mar­
ket not held" order to buy, and he feels that the stock will "downtick" (decline 
in price) or that there is a surplus of sellers in the crowd, he may often hold off 
on the execution of the buy order, figuring that the price will decline shortly and 
that the order can then be executed at a more favorable price. In essence, the 
customer is giving the floor broker the right to use some judgment regarding the 
execution of the order. If the floor broker has an opinion and that opinion is cor­
rect, the customer will probably receive a better price than if he had used a reg­
ular market order. If the broker's opinion is wrong, however, the price of the 
execution may be worse than a regular market order. 
Limit Order. The limit order is an order to buy or to sell at a specified price 
- the limit. It may be executed at a better price than the limit - a lower one for 
buyers and a higher one for sellers. However, if the limit is never reached, the 
order may never be executed. 
Sometimes a limit order may specify a discretionary margin for the floor broker. 
In other words, the order may read "Buy at 5 with dime discretion." This instruction 
enables the floor broker to execute the order at 5.10 if he feels that the market will 
never reach 5. Under no circumstances, however, can the order be executed at a 
price higher than 5.10. Other orders may or may not be accepted·on some option 
exchanges. 
Stop Order. This order is not always valid on all option exchanges. A stop 
order becomes a market order when the security trades at or through the price 
specified on the order. Buy stop orders are placed above the current market 
price, and sell stop orders are entered below the current market price. Such 
orders are used to either limit loss or protect a profit. For example, if a holder's 
option is selling for 3, a sell stop order for 2 is activated if the market drops 
down below the 2 level, whereupon the floor broker would execute the order as 
soon as possible. The customer, however, is not guaranteed that the trade will be 
exactly at 2. 
Stop-Limit Order. This order becomes a limit order when the specified price 
is reached. Whereas the stop order has to be executed as soon as the stop price 
is reached, the stop-limit may or may not be filled, depending on market behav­
ior. For instance, if the option is trading at 3 while a stop-limit order is placed 
at a price of 2, the floor broker may not be able to get a trade exactly at 2. If the