One-Cancels-The-Other Order
An OCO order sets two orders of the same quantity for the same contract at different price levels. These orders are automatically linked together, meaning if one of the order gets executed, the other order automatically gets cancelled. These orders could either be day orders or good-till-canceled orders. This type of orders are used for risk mitigation purposes.
Example
Assume that a stock is trading at $50. An investor places an OCO order, which consists of a stop-loss order to sell 1000 shares at $48, and a simultaneous limit order to sell 1000 shares at $55. Now, if the stock trades up to $55, the limit order to sell would be executed, and the $48 stop-loss order will be automatically cancelled.
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