Definition of Not-Held Order
A Not-Held Order gives a broker the discretion to choose the timing and price of executing a trade, with the responsibility for any losses or missed opportunities resting on the investor. Unlike a held order, which demands immediate execution, a not-held order enables the broker to take time to find the best price available, often hoping for better results than a market order could yield instantly.
| Not-Held Order | Held Order |
|---|---|
| Broker has time and price discretion | Requires immediate execution |
| Not responsible for client losses or missed opportunities | Broker responsible for executing at the current market price |
| Can be a market order or limit order | Usually a market order |
| Used when aiming for a better price | Prioritizes immediate execution despite possible price changes |
Examples:
- Not-Held Order: An investor submits a not-held order for 100 shares of XYZ at the market price, allowing the broker to find a favorable price over a designated time frame.
- Held Order: An investor places a held order for the same shares, which is executed at the best available price immediately without waiting for a better market condition.
Related Terms:
-
Market Order: An order to buy or sell a security immediately at the current market price.
- Example: If you place a market order for 50 shares of ABC, you’re saying “Give me those shares now, whatever the price!”
-
Limit Order: An order to buy or sell a security at a specific price or better.
- Example: If you set a limit order to buy 50 shares of ABC at $20, the broker will only execute your order if the price hits $20 or lower.
Chart: Not-Held vs Held Orders
graph TD;
A[Investor] -->|Not-Held Order| B[Broker]
A -->|Held Order| C[Broker]
B --> D{Best Price Found?}
D -- Yes --> E[Execute]
D -- No --> F[Investor Not Responsible]
C --> G[Execute Immediately]
Humorous Tidbits:
- “A not-held order is like asking your friend to pick up your favorite dessert. You trust them to find the best one, but remember, if they grab a fruit cake, that’s all on you!”
- Funny fact: The first exchange was in Amsterdam back in the 1600s; back then, orders were simply “Please buy this thing, and if not, no worries, I meant the better kind!”
Frequently Asked Questions
-
What type of orders can a not-held order be?
- Not-held orders can be either market orders or limit orders.
-
Are brokers guaranteed to get better prices with not-held orders?
- No, the best price is dependent on market conditions; brokers aim for better prices but can’t guarantee them.
-
What happens if my not-held order isn’t executed?
- If the broker can’t find a suitable price, the order may remain unfulfilled or executed at a less favorable price.
-
Can I change my not-held order after placing it?
- Yes, but changing it late might mean the broker already placed it based on discretion.
-
Why would one prefer a not-held order over a held order?
- If you’re seeking potentially better prices over immediacy, a not-held order is the way to go!
Resources for Further Reading
- Investopedia: Not-Held Orders
- “A Random Walk Down Wall Street” by Burton Malkiel
- “The Intelligent Investor” by Benjamin Graham
Test Your Knowledge: Not-Held Order Quiz
## What is the main characteristic of a not-held order?
- [x] Gives the broker discretion to find the best price over time
- [ ] Always guarantees the best price
- [ ] Must be executed immediately
- [ ] It’s a type of tax return
> **Explanation:** A not-held order empowers brokers to use their discretion and seek optimal conditions instead of an immediate execution.
## Why might an investor use a not-held order?
- [x] To potentially secure a better price
- [ ] To force a broker to act faster
- [ ] It’s the only option available
- [ ] Because they simply enjoy ambiguity
> **Explanation:** Investors hope for better price opportunities rather than a quick transaction.
## A not-held order leaves the broker responsible for potential losses. True or False?
- [ ] True
- [x] False
> **Explanation:** In fact, the investor assumes responsibility for any missed opportunities or losses stemming from a not-held order.
## Which type of order can a not-held order be?
- [ ] Only market orders
- [ ] Only limit orders
- [x] Either market or limit orders
- [ ] None of the above
> **Explanation:** A not-held order can be executed as either a market or a limit order based on strategy.
## In a held order, the broker is responsible for executing in a reasonable time frame. True or False?
- [x] True
- [ ] False
> **Explanation:** Held orders require immediate execution, so the broker is indeed responsible.
## What is the downside of a not-held order?
- [ ] Prices are guaranteed to rise
- [x] The market may move, leaving the investor with worse prices
- [ ] There's a service fee
- [ ] It is the only order type that loses money
> **Explanation:** While hoping for better prices, the market might turn against the investor while waiting.
## Can an investor cancel a not-held order after placing it?
- [ x] Yes, but depending on the timing
- [ ] No, it’s irreversible
- [ ] Only in the case of extreme market events
- [ ] It can only be modified, not canceled
> **Explanation:** Investors can cancel not-held orders, though it’s wise to consider the timing for those changes.
## An investor submits a not-held order. What does that mean?
- [x] The broker can aim for a better price without liability for losses
- [ ] The order must execute at the market price immediately
- [ ] The investor has more control than the broker
- [ ] The order is guaranteed to execute
> **Explanation:** The investor knows that the broker will try to find a better fill but without taking heat for missed opportunities.
## What’s a humorous way to think about placing a not-held order?
- [ ] It’s like asking your broker to think on their feet and grab the last donut!
- [x] It’s like giving your broker the task of grocery shopping—get the best price!
- [ ] It’s like waiting for rain in an ice cream truck—you just don’t do it!
- [ ] It’s as easy as pie... if pie fell through the sky!
> **Explanation:** Giving the broker time to hunt for your "perfect price" order is a playful parallel to them doing the grocery shopping!
## If no opportunity arises, what happens to a not-held order?
- [ ] It's executed anyway
- [ ] The investor has to pay extra
- [x] It may remain unfulfilled or get a worse fill
- [ ] The broker pays the difference
> **Explanation:** The investor's financial fate lies in the hands of market movements while waiting.
Thanks for reading! Remember: sometimes the best price isn’t just about timing; it’s about letting your broker play a little hard to get! 😉💰
