All Or None (AON)
Contents
Demystifying All Or None (AON) Orders: A Comprehensive Guide
All or none (AON) orders play a crucial role in the realm of trading, offering investors a specific directive: fill the order completely or cancel it altogether. In this guide, we'll unravel the intricacies of AON orders, explore their significance in the market, and examine real-world examples of their application.
Understanding AON Orders
AON orders represent a contingent order type wherein traders stipulate that the entire order must be filled, with no partial fills accepted. This instruction affects the duration of the order's validity, remaining active until filled or canceled. While AON orders prevent partial fills, they may take longer to execute than conventional orders, especially for larger order sizes.
Navigating AON in Practice
In real-world scenarios, AON orders prove advantageous when transacting with thinly traded securities or when specific order sizes are necessary for hedging purposes. However, executing larger AON orders in illiquid markets poses challenges, as they constitute a significant portion of daily trading volumes.
Example of AON in Action
Consider an investor placing an AON order to purchase 200 shares of Microsoft common stock at $100 per share. This order specifies both the number of shares and the required price, ensuring completion only if all 200 shares are purchased at the designated price. While smaller orders like this are likely to be filled promptly, larger orders face greater hurdles, particularly in illiquid markets.