An All or None (AON) order is a specific trading instruction used by investors who want to buy or sell a fixed quantity of securities in a single transaction without accepting partial fills. This means the entire order must be completed at the specified price or better, or not at all.
How Does an All or None (AON) Order Work?
When placing an AON order, you specify both the quantity of shares and the price you want. Your broker will then seek to execute that entire quantity at the set price or better. If it is impossible to fill the entire amount, the order won’t execute, preventing any partial trade.
For example, if you place an AON buy order for 200 shares of a stock at $25 per share, the broker will only purchase if all 200 shares are available at $25 or less. If only 150 shares are available at that price, the order won’t fill.
Why Use an AON Order?
AON orders are valuable for investors who need:
- Complete Execution: To avoid partial positions that could lead to inconsistent portfolios.
- Price Control: You maintain control over the price and quantity, safeguarding investment or liquidation strategies.
- Large Block Trades: Institutional investors or large-scale traders often use AON orders to handle significant volumes smoothly.
Common Uses and Limitations
AON orders are usually combined with limit orders to set a maximum buy price or minimum sell price. They are less useful for illiquid securities where finding the full quantity is difficult, which could result in the order never filling.
Unlike a market order, which executes immediately at current prices but can result in partial fills, an AON order ensures no partial trade execution but risks no execution at all.
AON orders also differ from a Fill or Kill (FOK) order, which requires immediate execution in full or cancellation, whereas AON orders may remain active over a longer period until executed or expired.
Practical Example
Imagine an investor wants to acquire exactly 1,000 shares of a company at $10 per share to maintain portfolio balance. By placing an AON limit order at $10, the investor’s broker only executes the purchase if all 1,000 shares are available at that price or less. Partial fills of 500 or 800 shares won’t execute, thus avoiding uneven portfolio increments.
Tips for Using AON Orders
- Pair with Limit Orders: This combination maximizes price and quantity control.
- Check Liquidity: Use AON orders on highly traded stocks for better chances of full execution.
- Set Order Duration: Choose appropriate validity (day, good-’til-canceled) to suit your timing needs.
- Be Prepared for Waiting: The order may remain open longer if the full quantity isn’t readily available.
Final Considerations
Using an AON order helps ensure your trade strategy is executed exactly as planned, with no partial fills. However, the trade-off is potential non-execution if market conditions don’t match your criteria. Understanding the nuances and pairing it with other order types can enhance effectiveness.
For more on order types that manage execution and timing, see our articles on limit orders, market orders, and Fill or Kill orders.
Sources
- Investopedia: All or None (AON) Order
- U.S. Securities and Exchange Commission: Investor Bulletin on Order Types
