How do I get my order filled? (The “8-Day Fill Rule”)
How do I get my order filled? (The “8-Day Fill Rule”)
Please note that options trade only during regular market hours. Options on stocks trade from 9:30 a.m. to 4:00 p.m. ET. The close of trading for options on ETFs coincides with the closing of the underlying security.
All new trades are good for eight trading days with the deadline noted in bold at the top of each trade alert.
Most members place their orders on Thursday morning when the new trades are announced. But this isn’t day trading. If you’re away from a computer and can’t place your trades right away, that’s okay.
Once you click the “Submit Trade” button for your new OFI credit spread trade, your broker’s system begins trying to find other people or institutions who will agree to take you up on the option spread you’re attempting to open. Until that match is made, your spread order is merely an offer and has not been consummated. When the match is made, your spread has been successfully filled.
About 50% of the time, we find that orders fill on the first day – you’ll see fellow OFI members reporting their fill prices in the website’s Stock Talk forum below each alert.
But don’t be surprised if your order lingers in the “Working” category even if others report getting filled. About 45% of the time, orders don’t fill on the first Thursday but do fill sometime during the next six trading days (Friday to Friday). Patience is golden as about 90% of the new trades eventually fill in the first seven trading days at Jim’s recommended limit price.
About 5% of the time, however, your order will not fill in the first seven trading days, and you’ll want to take action on the eighth and final trading day.
OFI credit spread trades are issued on Thursdays and should be placed good-till-canceled (GTC) through the Friday of the following week (seven trading days). If the trade remains unfilled on the Monday (or Tuesday if the options exchanges are closed for a Monday holiday) after this 7-day period, then you can reassess and possibly adjust lower the limit credit.
Here are two price-adjustment methods to consider for a five-point spread on the eighth trading day:
- After ascertaining the current midpoint spread price, gradually lower your limit price in small increments for optimal (i.e., maximum) price discovery – this is Jim’s recommendation:
- Before the market opens on the eighth-trading day Monday, go into your Open Orders page in your brokerage account to find any unfilled orders from two Thursdays ago. If you have one or more…
- Choose the Modify or Replace button next to that order. Your order entry screen may show you the current bid price, ask price, and midpoint price of the option spread. Focus on the midpoint price only as it is the fairest price likely to be filled.
- If the midpoint price of the five-point spread is currently offered at well below $0.85, you may choose to simply adjust the limit order immediately to $0.85 because any higher credit amount is probably not going to happen.
- If the midpoint price of the spread is at $0.85 or higher, consider setting a new limit price slightly higher than the current midpoint price (e.g., 10 cents to 25 cents higher) and waiting 30 minutes. If the order doesn’t fill, then consider adjusting the limit price in five or 10-cent increments every 30 minutes until filled.
- Lastly, if the order still won’t fill and you have run out of time for additional price adjustments, consider adjusting all the way down to $0.85 and holding firm at this minimum limit credit until the end of the trading day.
- Don’t go any lower than an $0.85 credit on a five-point spread because the trade will cease to make sense financially. Whereas Jim targets a 25%-45% potential rate of return on most new trades, he’s willing to go as low as a 20.5% potential rate of return on the eighth and final trading day [$0.85 credit received / ($5.00 spread width – $0.85 credit received) = 20.5%].
- Enter all limit orders on the eighth trading day as Day orders rather than GTC; if they don’t fill on this day, you want them to cancel automatically.
- Don’t Adjust the Initial Recommended Limit Price one Iota – some members choose to simply cancel their limit order at the end of the eight-day trading period if they can’t get filled for the initial recommended credit. With this no-compromise method, you may miss out on one out of 20 trades.
You may use whatever fill method you wish as long as you observe two rules:
- Do NOT go below Jim’s original limit price during the first seven trading days, and
- Do NOT go below $0.85 on a five-point spread or $1.70 on a 10-point spread during the eighth and final trading day.
If you choose not to follow Jim’s advice, please do NOT post your unauthorized trade fills in the Stock Talk forum as it confuses other members. Jim will not make a trade alert official and offer any follow-up advice unless he can verify that at least one member has filled in accordance with his rules.
Once you have a filled credit spread contract, keep an eye on Jim’s Trade Alerts especially as the contract gets within three weeks of expiration. At that point, you will encounter one of three scenarios: the contract will expire worthless, you’ll roll the trade, or in rare cases you’ll get assigned.
- If at expiration your trade is out of the money (for put credit spreads, that means the stock price is equal to or higher than the short strike price you sold, and for call credit spreads, that means the stock price is equal to or lower than the short strike price you sold), Jim will likely want you to allow the contract to expire worthless. This is the normal, successful outcome and you will not receive an Alert because there’s no need for you to take action beyond celebrating with your fellow members on Stock Talk. You can then redeploy your winnings into new trades.
- If the trade needs more time to be successful, Jim may issue a Trade Alert to roll. While patience is a virtue when placing a new trade, rolling should be done as soon as possible. See more about rolling put credit spread trades here. Since Jim often works in the wee hours of the morning and posts his Trade Alerts on the Options for Income website first, experienced OFI members log into this website to read them here instead of waiting for the email and text-message Trade Alerts to be broadcast.
- It’s fairly rare that an OFI member gets assigned before rolling. You can read more about assignment at Am I going to Get Assigned?
Jim explains more about assignment and about the special situation of rolling a put credit spread into a call debit spread here.
If you have any questions about using the broker’s website to manage the trade yourself online, your broker will be eager to help you. If you have other questions about the trade, you’ll likely find the answers in OFI’s Help Center or in the Stock Talk discussion at the bottom of that Trade Alert.