Good-Till-Canceled Order (GTC)

Good-Till-Canceled Order GTC Order Stock Orders Brokerage Financial Markets Trading Strategy
A brokerage customer's order to buy or sell a security, usually at a particular price, that remains in effect until executed or canceled.
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Overview

A Good-Till-Canceled (GTC) Order is a type of order issued by an investor to buy or sell a security, generally at a predetermined price, which remains in effect until the order is either executed or explicitly canceled by the investor. This type of order extends beyond the single day duration of Day Orders, allowing for more control over the timing and conditions for trade fulfilment.

Examples

  1. Stock Purchase: An investor places a GTC order to buy 50 shares of XYZ Corporation at $45 per share. This order will stay active until the price reaches $45 and the shares are purchased or the investor cancels the order.

  2. Selling for Profit: A shareholder holds 100 shares of ABC Inc., purchased at $30 each. They place a GTC order to sell their shares if the price hits $50. This order will remain active in the market until the share price meets the target, or it’s canceled.

Frequently Asked Questions

1. How long does a GTC order remain active?

A GTC order remains active until it’s either executed or explicitly canceled by the investor.

2. Can GTC Orders be partially filled?

Yes, GTC orders can be partially filled. If conditions for the order are met for a part of the shares or securities specified, that portion will be executed, and the remaining order will stay active until fully executed or canceled.

3. Is there any time limit after which a GTC order will be canceled automatically?

While theoretically, a GTC order has no set expiration date, most brokerage firms have internal policies that limit the duration to a specific time frame, such as 90 days or six months, after which they need to be renewed.

4. Are there any specific securities that cannot be traded with a GTC order?

This can depend on the broker and the types of securities allowed on the trading platform. Some exchanges or brokers may not support GTC orders for certain low-liquidity or volatile stocks.

5. How does a GTC order compare to a Day Order?

A Day Order expires at the end of the trading day if not executed, whereas a GTC order remains active until it’s either executed or canceled by the investor, potentially staying in place for weeks or months.

Fill or Kill Order (FOK)

A Fill or Kill (FOK) order is an instruction to execute a transaction in its entirety immediately at a specified price, and if the order cannot be executed fully, it is canceled immediately.

Online References

  1. Investopedia on Good-Till-Canceled Orders
  2. SEC on Types of Orders
  3. FINRA on Market Orders, Limit Orders, and Stop Orders

Suggested Books for Further Studies

  1. “Understanding Wall Street” by Jeffrey B. Little and Lucien Rhodes
  2. “The Intelligent Investor” by Benjamin Graham
  3. “The Little Book of Common Sense Investing” by John C. Bogle
  4. “A Random Walk Down Wall Street” by Burton G. Malkiel

Fundamentals of Good-Till-Canceled Orders: Finance Basics Quiz

### What is a Good-Till-Canceled (GTC) order? - [x] An order that remains active until executed or canceled. - [ ] An order that expires at the end of the trading day. - [ ] An order to buy a security at any available price. - [ ] An order to sell a security at a fixed price immediately. > **Explanation:** A GTC order is an instruction to buy or sell a security at a specified price, remaining active until it is either executed or canceled by the investor. ### How does a GTC order differ from a Day Order? - [ ] A GTC order expires at the end of the trading day. - [x] A GTC order remains active until executed or canceled. - [ ] Both orders expire at the end of the trading day. - [ ] There is no difference between the two. > **Explanation:** A Day Order expires at the end of the trading day if not executed, while a GTC order remains active until it’s either executed or canceled. ### What could happen if conditions for a GTC order are partially met? - [x] The order can be partially filled. - [ ] The entire order is canceled immediately. - [ ] The remaining portion is filled at a higher price. - [ ] The partial fulfillment is not allowed. > **Explanation:** GTC orders can be partially filled. The remaining part of the order will stay active until fully executed or canceled. ### When do most brokerage firms automatically cancel a GTC order? - [ ] After 1 day - [x] After a specific time frame set by the firm, often 90 days or six months - [ ] After 2 years - [ ] Never, they remain active indefinitely. > **Explanation:** Most brokerage firms have internal policies that limit the duration of a GTC order to a specific time frame, such as 90 days or six months. ### Which of the following orders must be executed immediately, entirely, or not at all? - [x] Fill or Kill (FOK) order - [ ] Limit order - [ ] Day order - [ ] Immediate or Cancel (IOC) order > **Explanation:** A Fill or Kill (FOK) order is an instruction to execute a transaction in its entirety immediately at a specified price, and if the order cannot be executed fully, it is canceled instantly. ### True or False: GTC orders are automatically executed at the end of each trading day. - [ ] True - [x] False > **Explanation:** GTC orders are not executed automatically at the end of each trading day. They remain active until they are either executed at the specified price or canceled by the investor. ### Can an investor cancel a GTC order anytime? - [x] Yes, an investor can cancel it anytime before it's executed. - [ ] No, it must remain in place until executed. - [ ] It can only be canceled at the end of the trading month. - [ ] It requires approval from the exchange before cancellation. > **Explanation:** An investor can cancel a GTC order anytime before it gets executed. ### What is a limitation associated with GTC orders? - [ ] They automatically renew each month. - [ ] They are limited to high-value stocks. - [x] They may expire per brokerage firm's policy after a certain period. - [ ] They cannot be canceled once placed. > **Explanation:** While theoretically, a GTC order has no set expiration, brokerage firms have policies limiting their duration, often to 90 days or six months. ### Which type of market order ensures full execution of the specified amount, or it cancels the order? - [x] Fill or Kill Order - [ ] Good-Till-Canceled Order - [ ] Day Order - [ ] Stop Order > **Explanation:** Fill or Kill Orders ensure full execution of the specified amount immediately or cancel the entire order if it cannot be done at once. ### Why might an investor use a GTC order? - [ ] To avoid market volatility - [ ] To sell immediately at market price - [x] To ensure a trade is made at a desired price, regardless of time - [ ] To speculate on intraday price movements > **Explanation:** Investors use GTC orders to ensure that a trade is made at a desired price, without worrying about the time it takes for the price to be hit.

Thank you for exploring the nuanced world of trading orders with our well-structured content and challenging quiz questions. Continue mastering your financial and trading knowledge!

Wednesday, August 7, 2024
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