About Brackets
Brackets allow you to integrate your risk
management strategy directly into the creation of an equity or option
order. Using brackets you can predefine profit and loss targets for trades
where, if those targets are met, the software will automatically send
an order to exit the position.
To use
brackets, check Spec Cond &
Brackets in the Trading Window
when entering an order.
See examples
of Bracket orders
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Bracket orders are conditional orders you can attach to your stock or
option orders. They consist of a primary order and up to three contingent
orders, which if triggered, will close out the position opened by the
primary order. Brackets can provide automated risk protection for your
open positions regardless of whether you are logged on to the software.
When you check Spec
Cond & Brackets and click
Buy or Short
(or for options,
Buy to Open or
Sell to Open), a second window opens, where you can specify the
terms of the bracket order(s).
TIP: Brackets
can also be added to orders initially opened without brackets. See Managing Bracket Orders for instructions.
Stock symbols and price and volume data shown here
and in the software are for illustrative purposes only. Charles Schwab
& Co., Inc., its parent or affiliates, and/or its employees and/or
directors may have positions in securities referenced herein, and may,
as principal or agent, buy from or sell to clients.
Certain aspects of the bracket orders are predefined:
- The quantity of the bracket
order(s) will always be equal to the quantity filled in the primary order.
- Brackets remain active
with their primary order or primary position (when the primary order fills)
indefinitely, unless they are manually removed or are triggered and filled.
- Bracket orders can be
set up for any equity or option order that opens or adds to an existing
position, regardless of the venue of the primary order.
- Brackets on symbols with wide spreads may not fire if the spread is too wide.
- Bracket orders are only
active during the standard session (9:30 a.m. ET to 4:00 p.m. ET)
- Bracket orders are always
sent as a SmartEx Market order
regardless of the primary order's routing venue.
- Bracket orders trigger
off the bid/ask price for both stocks and options.
- While the Est.
Price is calculated off the Limit or Inside bid/ask price (for
market orders), the actual exit trigger price will be based on the average
fill price from the primary order. See the Bracket
Order Examples topic to get a better understanding of brackets in
action.
- Note:
Brackets will not adjust price
or quantity of shares due to corporate actions, including but NOT limited to stock splits, stock dividends,
spin-offs, mergers, and name changes.
- Bracket orders will not
function on boxed positions.
- Brackets placed on stocks
that do not have bid/ask quotes, including Pink Sheet securities will
not activate.
- When placing a bracket
order to sell and close out a long position,
if the tradable quantity of your position is less than the quantity you
specify in the order, the software will send the order for the lesser
amount rather than rejecting the order due to insufficient shares available
to trade.
You may establish up to three types of exits:
- Profit
Exit: Specifies the increase (or decrease for short orders) in
value from the average fill price required to trigger the profit exit.
The value can be a certain number of points (pts) or a percentage change
from the execution price, or the exit price itself.
For example, if you bought a stock at $10 and wanted to exit the position
at $12, you could enter 2 pts, 20%, or $12. The Est.
Price label will show you what the likely result might be if the
Profit Exit is triggered, but that price will be adjusted if the average
fill price on your order is different.
- Trailing
Stop Exit: Specifies the amount you are willing to let a stock
or option price go against whatever gains it may attain. This exit is
valuable in helping you retain as much of your gain in a position as possible
before closing it out. The value can be a certain number of points or
a percentage of the execution price.
If you use a trailing stop exit in conjunction with a profit and/or
loss exit, the trailing stop will operate between these two exits. If
either of the profit or stop loss exit prices are met, the bracket will
trigger regardless of any trailing stop you may have set.
For example, if you bought a stock at $10 and wanted to protect yourself
should the market move against you 5% (or .5 points per share) from the
execution price, the trailing stop would place an order to close your
position only if the stock price loses 5% from its highest gain. The worst
case scenario is that the exit order would go out at $9.50 because it
simply never gained on the execution price. Conversely, the stock might
not hit resistance until $14 before it drops .5 and the order is triggered.
If you had also set up a profit exit of 10 % and a loss exit of 3% in
conjunction with your trailing stop exit, the bracket would trigger at
either 3% below the execution price or 10% above that price if met. This
would occur regardless of your trailing stop calculation.
- Stop
Loss Exit: Specifies the decrease in value (or increase for short
orders) from the average fill price required to trigger the stop loss
exit. The value can be a certain number of points (pts) or a percentage
change from the execution price, or the stop loss price itself.
For example, if you bought a stock at $10 and wanted to ensure that
you won't lose more than 10% on the trade, you could enter 1 pt, 10%,
or $9. The Est. Price label will
show you what the likely result might be if the Stop Loss Exit is triggered.
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2013. All rights reserved. Member SIPC.
(0312-2067)