Alternative Order

  

Think of an alternative order as an either-or instruction to a broker. So you'll give your broker two options and if one of the options is executed, then the other order is immediately cancelled. As in “do one or the other of these, but for goodness sake DON’T DO BOTH!!!!”

It's like if your friend says he'd like to go to either Arby's or Taco Bell. Either one might be fun, but going to both probably points to a long night spent sitting on the modern day phone booth. In practical terms, an alternative order might go something like this: "either buy shares for New Tech Co. if it reaches $10 per share, or buy shares of Old-Tyme Car Maker Inc. if it hits $15 per share." The broker will then buy whichever stock hits its target first, then ignore the other option.

Related or Semi-related Video

Finance: What is a Specialist?6 Views

00:00

Finance allah shmoop what is a specialist I wouldn't have

00:06

a movie stallone wait different kind of specialist in finance

00:12

land a specialist is the gala guy trading in a

00:15

given stock that is there a member of a stock

00:18

exchange and they might carry inventory of satan Ten million

00:21

shares of microsoft trading currently at around forty bucks a

00:24

share their offering msft for sale at forty point Oh

00:28

five and they're our buyer of msft this moment at

00:32

thirty nine ninety one and see there's a fourteen cents

00:35

a share spread their meaning that they make fourteen cents

00:39

every time they transact So let's say that specialist sells

00:44

a million shares of microsoft today earning a fourteen cents

00:49

spread per share while fourteen cents times a million one

00:52

hundred forty grand and clown Nice payday for one day's

00:56

work so that's a pretty widespread in the scheme of

00:58

things because often brokers have to tack on their own

01:01

commission of a few cents on either side and the

01:04

specialist might in fact be dealing from their inventory to

01:08

brokers on both sides of a transaction in which case

01:11

they're spread I even spread to the actual specialist might

01:15

Be just a few cents times those million shares like

01:18

four cents times a million gets to forty grand Something

01:21

like that It's still a really good living but if

01:23

it's so good then why don't millions of people fight

01:26

for that job Like how hard is it tio Just

01:29

nod your head and right down buy or sell and

01:32

then a number you think everyone who flips burgers at

01:35

mcdonald's and is afraid of robots taking their jobs would

01:38

be killing for this gig Well in order to be

01:40

a spy specialist not only do you need you know

01:43

special education and a few siri's license exams but you

01:48

also need capital with which to buy inventory risky inventory

01:53

which you'll hold as if they are casino chips and

01:56

you are more or less the house So when the

01:59

microsoft shares example just to be a specialist in that

02:02

one stock well you have to raise something like one

02:04

hundred million dollars because you'll have to go into the

02:07

market to start and simply by two or three and

02:11

call two and a half million shares at around forty

02:13

bucks each for a total cost of a condo or

02:16

a silicon valley unit that's What a units called out

02:19

here and yes that's an investment and the stock could

02:22

go up but it could go down as well leaving

02:24

you holding a big fat smoldering bag of dog craft

02:28

dot com and also going whoever your investors or creditors

02:32

workout hundred million dollars Like if microsoft has kind of

02:36

evaporated you know what could happen More risks will hunt

02:39

your sleep in that the stock and suddenly gap down

02:42

three dollars on a bad quarter at which point your

02:45

spreads must widen to accommodate expected further volatility in the

02:49

stock And you then compete with other specialists who also

02:53

make a market in microsoft Well at any given time

02:56

they may want to get out of trading in it

02:58

and undercut you Buy a penny or two a share

03:00

leaving you as the sole big owner of what will

03:04

feel like a stock version of the titanic Well the

03:07

math gets complex is the market gets volatile specialists use

03:10

hedges and human beings end up competing against a i'd

03:14

driven black box computers But the reason you exist as

03:18

a specialist or rather the key job or responsibility of

03:22

the specialist is to provide liquidity That is you have

03:26

to buy and sell shares to accommodate the market that's

03:30

your job and in volatile markets It means that they

03:33

might run out of inventory or be squeezed and have

03:36

to buy shares at much higher or sell shares at

03:39

much lower prices than their cost But that's the risk

03:43

you take when you become a specialist they must execute

03:46

on these trades and if they don't they lose their

03:48

c This is specialist on the exchange altogether and are

03:52

more or less fully out of work And you know

03:54

i don't know working for uber lift or something next

03:57

Yeah and at that point well they might be willing 00:03:58.973 --> [endTime] Tio take just about anything for a ride

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