MFOHome About Commentary Discussions Funds The Best Resources Support Us!

Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

Sign In Register

Categories

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

Approaches to placing ETF trade orders?

msf
in Fund Discussions
How do people place orders for ETFs: market or limit and if limit, how is that limit chosen?

As someone who is primarily an OEF investor, I like the idea that if I pay $100 to invest in a fund, then at the end of the day I have $100 worth. So I'm satisfied if I don't "overpay" for an ETF, i.e. I don't wind up with less than $100 in shares at the end of my purchase day. I don't have to make a killing, I don't have to try to buy at the bottom of the day.

Yesterday I bought a ton of an ETF, one with a very stable price. I finally just placed a market order, figuring that best/worst case I'd come out a sawbuck ahead or behind. Not worth fretting over. Equity ETFs are very different. How do you approach these trades?

Comments

  • yogibearbullyogibearbull
    I look at bid-ask spreads that can be 25c-30c for some small ETFs.

    If I want to buy right away, I enter the limit price at ask, or in the middle of the spread.

    If I can wait a while, I would just enter limit price GTC few cents below the bid. Often, it got filled within the week, but sometimes, the price ran away.
  • JD_co
    ETFs that only trade under 30K shares per day usually have wider spreads, which can make trading them more difficult.

    If you get too stingy in a bull market that ticks up constantly and you go a few cents below the bid, you can end up with stale open (buy) trades. This has been a recurring issue for me the past few months.
  • Observant1
    edited August 15
    "How do people place orders for ETFs: market or limit and if limit, how is that limit chosen?"

    I confirm that an ETF has adequate liquidity before making a purchase.
    Recent intraday highs/lows are checked to gauge an ETF's daily price range.
    Limit orders are always used when buying/selling ETFs (I've only dealt with equity ETFs).
    Trading is avoided during the first/last 45 min. or so that the market is open.
    When purchasing ETFs, my limit order is sometimes priced within the bid/ask spread range
    but it may be below the current bid price at times.
    It may take several days to fill a "low-priced" order—sometimes these orders won't get filled.
Sign In or Register to comment.