Using a Walk Limit® Order on thinkorswim®

Upbeat music plays throughout.

Narrator: Options traders know prices can change quickly, so it can sometimes be difficult to get limit orders filled, especially at the price traders want. Enter: the Walk Limit^® order.

The Walk Limit order is an order type at Schwab that allows traders to place one order that automatically "walks" the price of an order up or down over a given time frame to make it more likely for the order to fill.

Let me walk you through how it works. Let's say a long call contract is currently trading at $10, with a bid of $9.80 and an ask of $10.20. So, $0.20 on either side. A trader could then set an order to automatically increase $0.10 every, say, 10 seconds. So, if a trader places a Walk Limit order at $9.80, it would start there, but then 10 seconds later it would cancel and be replaced with an order at $9.90. If that doesn't fill, 10 seconds later that would be replaced with an order at $10 even. And again to $10.10, and again to $10.20.

Once the order reaches the ask price, it will remain a limit order at the ask price until it's filled, canceled by the client, or it expires at the end of the trading session.

Traders can set their own walk increments as long as they are within the boundaries of the bid-ask spread, and there is a maximum of 10 increments per Walk Limit trade.  So, for example, if the bid-ask-spread is $0.10, and I set my increment at a penny, it would stop 'walking' so to speak one cent below the ask price.

Let's log onto the thinkorswim^® desktop platform and walk through how to actually place a Walk Limit order.

I'll go to the Trade tab and start placing an options trade the same way I normally would. For this example, I've pulled up a stock with a slightly wider bid/ask spread, Costco. The at-the-money (ATM) call with 80 days to expiration has a bid-ask spread of $2.60.

Let's say I want to buy this ATM long call. I'd click that ask price the same way I normally would, I'll adjust the number of contracts to one. And down in the order ticket I'll adjust the order type to Walk Limit. You'll notice a new line of choices appears below your order details. The bid and ask price automatically fill in as the start and end prices of your Walk Limit order, but you can adjust that to your own preferences. I'll leave them in place for now.

Next to those is the Price Increment. This is where I'll select how much I want each subsequent limit order to increase in price. I'll adjust that to be… $0.20. That means my maximum limit order price, or my end price, would be $2 higher than the start price. So even though you see $52.20 as my end price, the Walk Limit order will stop 'walking' at $51.85 because there can only be 10 increments on a Walk Limit order.

The last choice I have to fill out is the time increment. This tells the software how quickly I want each limit order to be replaced. Let's say… five seconds.  So that means I'd run through the entire Walk Limit in under a minute, so I'm hoping to get a pretty quick fill here.

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