Chapter 04 · Section 4.1
Limit Orders- Timing
Let us take a closer look at this limit order:
Buy 3 Puts Citicp July 55 at 6 3/8 or better
At the moment the order reaches the trading floor, Citicorp July 55 put options trade at 6 1/2. Should the floor broker buy?
a) no
b) yes
6 3/8 is the customer's limit price. He wants that price or a better price.
Do you prefer to buy at 6 3/8 or at 6 1/2?
The market price is neither equal to the limit price nor better. It is beyond the customer's limit.