Hi Mark,

I am trying to understand the basics of options. Please explain the terms contingency orders and off set orders in trading.

thanks,
Balakumar R


Hello Balakumar.

First let me tell you these terms have little to do with the basic concepts regarding options.  I hope you are not jumping in too rapidly.

A contigency order is an order that is submitted when something specific (the contingency) happens.  For example:

a) Buy 10 GM Jun 30 calls at the market if GM stock trades as high as 29.99.

b)Sell 100 shares if HAL at the limit price of 31.45 if the stock trades as low as 31.50.

c) Buy 6 IBM Oct 95/100 call spreads at the limit price of 2.05, if the Oct 95 calls trade at 4.00 or higher.

I am unfamiliar with the term 'off set order', but I assume you are referring to an order than offsets (or eliminates) a current position. Thus, if you own 5 IBM Jul 90 calls, when you enter an order to sell those calls, that is an offset order. 

Best regards,
Mark.