What Is an Immediate or Cancel (IOC) Order?

An immediate or cancel (IOC) order is a type of order that requires that all or part of the order be executed immediately or canceled. If the order cannot be fully executed immediately, then any portion of the order that cannot be filled will be automatically canceled.

Pros and Cons of Immediate or Cancel Orders

Here are some pros and cons of immediate or cancel orders:

Pros:

1. Speed: IOC orders are designed to be executed quickly, allowing traders to take advantage of immediate opportunities in the market.
2. Flexibility: IOC orders can be used for both buy and sell orders, and can be used to specify both the quantity and price of the trade.
3. Control: IOC orders give traders more control over their trades, allowing them to specify the exact terms under which they want their trades to be executed.

Cons:

1. Risk: IOC orders can be riskier than other types of orders, as they may not be filled in their entirety and may lead to partial fills or missed opportunities.
2. Complexity: IOC orders can be more complex than other types of orders, and may require more attention and active management by traders.
3. Fees: Some brokerages may charge additional fees for IOC orders, which can make them more expensive to use.

Traders should carefully consider their trading strategies and risk tolerance before using IOC orders, and should weigh the pros and cons of this type of order against other types of orders to determine which is most appropriate for their needs.

How Immediate or Cancel Orders Work

When placing an IOC order, the trader will specify a limit price and a time-in-force (TIF) condition. The limit price is the maximum amount that the trader is willing to pay for the order, and the TIF condition is the time frame in which the order must be filled. For example, if the trader places an IOC order with a limit price of $100 and a TIF of 5 minutes, then the order will only be filled if the price of the asset reaches $100 within the next 5 minutes. 

If the order is not filled within the specified time frame, then it will be canceled and the trader will not be charged any fees. This makes IOC orders an attractive option for traders who want to enter or exit a position quickly and without any risk.

Immediate or Cancel Orders vs. Good ‘Til Canceled Orders

Immediate or cancel (IOC) orders and good ’til canceled (GTC) orders are both order types used in trading securities, but they operate differently.

An IOC order requires that the order be executed immediately, either in full or in part, and any unfilled portion of the order is canceled immediately. This type of order is useful for traders who want to make a quick trade but do not want any unfilled orders lingering in the market.

In contrast, a GTC order remains active until it is either filled or canceled by the trader. This type of order can remain open for days, weeks, or even months, depending on the trader’s preference. GTC orders are useful for traders who want to set a price target and wait for the market to come to that price, without having to monitor their orders continually.

In general, an IOC order is more suitable for short-term traders looking to execute a trade immediately and cancel any unfilled portions of the order, while a GTC order is more suitable for longer-term traders who want to set a specific price target and leave the order open until it is filled or canceled. Ultimately, the choice between the two depends on the individual trader’s strategy and trading goals.

The Bottom Line

Overall, IOC orders are a great option for traders who want to enter or exit a position quickly. They are different from other order types because they are designed to be filled immediately or canceled, and they can help traders limit their exposure to the market.