An even options order is a type of order used in options trading that aims to achieve a net-zero outcome by combining a long and a short options position. This order type is only applicable to options spreads and not to single-leg options trades.
- Definition: An even options order refers to an options spread trade in which the value of the short leg completely offsets the value of the long leg, resulting in no cash being paid or received for the trade1.
- Limit Order Type: Some brokers offer even order alongside debit and credit order as a limit order type when trading options spreads. This means that when you select even, you don't need to specify how much debit or credit amount you wish to fill the options spread trade at, as the options broker will attempt to fill the spread position at a price where the short and long legs offset each other completely1.
- Applicability: Even orders are only applicable to trading options spreads and not to single-leg options trades such as long calls, long puts, short calls, or short puts2.
- Break-Even Price: The break-even price for an even order is the strike price of the underlying security, as the value of the short leg will equal the value of the long leg, effectively cancelling out any net gain or loss3.
In conclusion, an even options order is a specialized tool for options traders that allows them to achieve a neutral outcome in their options spread trades. It is an important consideration for options traders looking to manage their risk and maintain a balanced portfolio.
6/26/2024 07:55pm
