The wealth created by equities in the past few years have attracted a number of people to the stock markets. Many are long term investors, but an equal number of people are traders. When the markets crashed during the Covid-19 crisis, investors curtailed their activities, but traders continued their activities. Market volatility is not necessarily bad and traders often profit from sudden movements in share prices. Millions of trades take place at any given time in the market, and an active trader may have several active trades simultaneously. It can become tedious to track all the unexecuted positions. To avoid the situation, one can place an Immediate or Cancel Order or IOC order.
A brief understanding of the share market is necessary to understand the IOC order. One may enter the market by opening a free trading account, but without clear understanding, it is difficult to generate profits. The threshold for entry has come down with the advent of online trading accounts, which is extremely easy and convenient to open. So, after getting an online trading account, when you place a buy or sell order, there is no certainty of the order getting executed. There might be a mismatch between the number of people trying to buy a stock and people trying to sell it. If you place a buy order, but there is a lack of sufficient sellers, you may have to wait for the completion of the order. The waiting time creates a number of active positions, which may sometimes be confusing or difficult to track.
An IOC is one of the various types of orders. An IOC order is executed immediately, as soon as it is executed. It is a duration order and cancels out if it is not executed immediately. For instance, if you place an immediate or cancel order for 100 shares of XYZ, but 100 shares are not available in the market at the moment. The order will cancel out as soon as you place it. An IOC order does not create active positions, it is either executed or gets cancelled out. One doesn’t have to intervene to cancel the order, it is an automatic process. IOC is essentially a duration order, which is a category of orders that have a specified duration. In the case of IOC, the duration is a few seconds.
One can set the IOC as a market or limit order.
In the case of immediate or cancel orders, there is also a provision of partial fulfilment of the order. Suppose you place an IOC order to buy 100 shares of ABC company. There are not enough shares of ABC to be sold at the moment, but since an IOC order is executed immediately, you will be allotted 20 shares, while the order for the balance 80 shares will be cancelled automatically
An IOC order is most effective when you have to place a large order, but you do not want to influence the markets. A large order, especially in low volume stocks, can influence the price if left open for a long time. The IOC doesn’t remain open for a long time and the partial fulfilment facility makes it a flexible option. Even if the number of shares sought is not available, an IOC ensures that whatever is available is assigned to the trader, unlike an all or none order. An IOC order can be built into the online trading account. An IOC order is also a potent tool if you use algorithms or programs to trade through your free trading account. It helps you trade nimbly and you do not have to monitor every large order that you place.
An immediate or cancel order can be immensely effective if used properly. One can execute multiple IOC orders without the need to track their status for a long time. However, it should be used sparingly as a large number of partially fulfilled IOC orders can disturb your calculations. To start trading using IOC orders, you can open an IIFL demat and trading account . The IIFL demat and trading account is an all-in-one account and you can make multiple investments through a single platform.