What is Fill Or Kill Order (FOK)?
Fill order refers to the execution or completion of the order. It is a regular occurrence in all financial markets. To fill an order, one needs to have sufficient trading volume or traders to buy and sell. Additionally, the traded stocks should be valid, and the trade should occur during trading hours.
The conditions should be met since the order is more likely to be filled only when the market is active. Still, some orders don’t get filled, and that is why we will learn more about fill-or-kill orders.
A fill-or-kill (FOK) order is a conditional time-in-force order. It is often used by active traders who must buy or sell crypto immediately at a specified price. Most of the time, large amounts of stock are involved.
The order must be filled in its entirety by the involved parties. However, if the price is unavailable at the moment, the order is cancelled.
How Does a Fill or Kill Order Work?
Fill or kill order works on a simple logic of either executing the order or killing it entirely. Let’s take a scenario where a trader wishes to buy 200,000 shares of a stock at $15 per share, and it has to be immediate. The order fulfils three conditions of buying a particular amount of shares of a stock at a known price and immediately.
Then, the trader can request the broker to put a fill or kill order for this trade. Now, the broker has two options of either filling the order or killing the order. In case the trader’s limit price and the market price tally then, the order is filled. In the concept fill or kill order, there is no partial fill.
An order can only be filled as a whole, meaning that the order either gets executed the way you wish or not. If the order is killed, then the order gets cancelled entirely. It does not make it to the stock market at all.
The tool is essential during a one-time trading opportunity. This way, you can operate following your requirements with all the conditions in place.