Best Option Order Entry Practices

When someone decides to place an option order, the myriad of choices available for option order entry can be overwhelming, more so than with regular stock orders. Most brokers do their best to get you the best pricing for your orders, but sometimes market conditions can cause an option order to fill at very poor value. How do you pick the right type of option order entry parameters to get the best price in different situations?

How you choose to enter your order can impact the speed and quality of your fill. Understanding the impact of your choices and being situationally aware can make a big difference in how your orders fill, and over time can make a significant difference in the net profit and loss of your account. Those pennies and nickels add up, especially when you multiply them by 100 shares and multiple contracts over many trades.

Introduction: Why Order Entry Matters More Than You Think

In options trading, most of the attention goes to strategy selection — iron condors, vertical spreads, diagonals, calendars, butterflies, and so on. But the way you enter and exit those trades can have just as much impact on your long‑term profitability as the strategy itself.

Sloppy order entry can cost you in:

Slippage — paying more (for buys) or receiving less (for sells) than necessary
Execution risk — missing fills entirely on good trades
Psychological strain — chasing fills or second‑guessing your price

This write up will walk you through the mechanics and best practices for entering trades with precision, control, and efficiency.

The pros and cons of market orders vs. limit orders
How to anchor to the mid price for better fills
The mechanics of walking limit orders
Liquidity considerations and how they affect execution
A mechanical workflow you can follow every time

By the end, you’ll have a repeatable, disciplined process for order entry that minimizes slippage, maximizes price improvement, and reduces execution stress.

Before we go any further, the working assumption is that we are talking about the situation where you are trying to execute the trade right away, in the next few seconds or minutes. You want to enter into a position you don’t have, or you want to get rid of a position you have at a price that the market currently is priced at, but you want to do it in a way that is best for you.

Alternatively, we can set profit targets or stop loss targets and enter trades that may be in place for days or weeks. There’s nothing wrong with that approach, and I often use it for certain strategies, but for most day to day trades, I want to get in when I’m ready, and I want out when I’m ready, especially when I’m rolling (closing one position and simultaneously replacing it with another later dated position). Order entry practices are a different topic from management strategies for a trade- an example of management strategies would be the write up comparing holding, folding, and rolling.

So, when I’m ready to place an order with the intent to get a filled trade, I have many choices and decisions to make.

Market Orders vs. Limit Orders: The Core Decision

We’ll start with the basics of two common types of orders: market vs limit.

Market Orders — Speed at a Cost

A market order tells your broker: “Fill me now at the best available price.”

Advantages:

Speed — Execution is almost instantaneous.
Certainty of fill — You’ll get in or out, no matter what.
Useful in emergencies — For example, closing a position to avoid assignment risk or a margin call.

Drawbacks:

No price control — You could get filled far from the last trade.
Slippage risk — Especially dangerous in wide‑spread or illiquid options.
Potential for “price shock” — Seeing a fill $0.20–$0.50 worse than expected can be psychologically jarring.

When to consider market orders:
Exiting a losing trade where speed trumps price.
Trading extremely liquid underlyings (e.g., SPX, QQQ, AAPL) with penny‑wide spreads during calm periods.
Situations where the cost of missing the fill is greater than the cost of slippage.

In options, where spreads can be wide and liquidity uneven, market orders are often a blank check to the market maker — especially in low‑volume contracts. Because of this, I almost never use market orders for options. I rarely use them for stocks.

Market orders for stocks can be a little easier for heavily traded stocks with penny wide spreads under calm conditions. But even on the heaviest traded option contracts, it is still a bit of a crap shoot. Spreads are wide, and liquidity changes second to second. I just don’t trust the market to fill my trade at a fair price.

Stop Loss Orders

A stop loss order is a form of a market order that can be a wolf in sheep’s clothing. A stop loss order is an order that tells the broker- if a position loses more than a certain amount of money, close it out at the market price- the best you can do. However, this is often when many others are also wanting to do the same thing as you, and the market makers will take a position at a price where they are confident they can make money, a price usually a lot less than you’d prefer.

As a result, most stop loss orders are filled at a price less favorable to the trader than the stop price. The difference between the two is often referred to as slippage. The more volatile a move is against a position, either up or down, the greater the amount of slippage there is likely to be.

Stop losses on spreads can be especially tough to get a good fill. Many spread traders avoid stop losses on the spread, and will only enter a stop loss on the short option of the spread.

Another watchout with stop losses is that they can be accidentally triggered even when the option with an order never trades below the stop price. For many brokers and types of stop losses, a quick instant where the bid and ask price go beyond the stop price can trigger the stop loss order and the trade can be executed even though the price didn’t dictate that it should. Carefully check what conditions your broker uses to trigger a stop loss order to avoid an accidental trade.

To be fair, market makers are competing for your trade, and will often fill market orders between the bid and the ask price. That is more true for single options order transactions during calm market times. Prices for a single option are fairly clear, and the market maker knows how liquid that option is and how to either pass it off in the market or hedge and hold it. Multi-leg trades are a pain for market makers so they aren’t excited to give you a great price or compete because they have to manage a plan for each leg after they acquire it from you, both short and long. In the split second they and their computers have to decide, they’ll find a price that is safe for them to work out the next transaction rounds after acquiring your position.

There may be times when a market order makes sense for option orders, but most horror stories of option trades gone amuck involve market orders of some type.

Limit Orders — The Trader’s Default

A limit order says: “Fill me at this price or better.”

Advantages:

Price control — You define your maximum debit or minimum credit.
Protection — Avoids bad fills in thin or volatile markets.
Discipline — Forces you to pre‑define acceptable trade terms.

Drawbacks:

No guarantee of execution — The market may never trade at your price.
Active management — You may need to adjust if the market moves away.

When to use limit orders:

Almost always for entries.
For exits where price improvement matters.
Any time you’re trading multi‑leg spreads with non‑penny‑wide markets.

For most options traders, limit orders are the default for both entries and exits. They allow you to work the order book to your advantage.

But how do you know what the right limit price is? How do you “work” a limit price? What kinds of alternatives are there to make limit orders easier to manage? These are the questions we’ll explore as we continue through this article.

The Mid Price: Your Baseline for Fair Fills

I’ve been surprised at how many people don’t understand the concept of the mid price, especially people in power who should know better. I’ve listened to a lot of regulators and politicians that talk about how terrible it is that brokers and market makers make money off of the spread between the bid and the ask price and how market makers are even paid extra on top of that for order flow. To hear these people, you’d think that you have to accept the bid or ask price when you place an order, and you are lucky to get that.

In actuality, the bid price is the highest or best current price someone is willing to pay to buy something you are willing to sell (it is their “bid” to buy, or the market’s bid). On the other hand, the ask price is the lowest or best current price someone is willing to sell a security that you want to buy. The spread is the gap between sellers and buyers- there’s a bit of a stand-off until someone offers something that someone on the other side is willing to accept.

When you enter a limit order, you are placing your bid or ask into the market, saying, “I’m willing to pay this much, or sell for this much.” If you pick a price between the existing bid and ask price, you are jumping in front of everyone else and trying to entice someone on the other side of the trade to meet you part way. One common place to try to meet is at the mid price.

What Is the Mid Price?

The mid price is the midpoint between the bid and ask:

Mid Price=(Bid+Ask)/2, or the halfway point between.

Example: If the bid is $1.20 and the ask is $1.40, the mid price is $1.30.

Why Start at the Mid

Market makers anchor spreads around the mid — it’s the “fair” price
Many fills occur at or near the mid in liquid markets
Starting at the mid maximizes your edge without sacrificing too much fill probability

Setting “At Least as Good as Mid” Orders

Best practice:

For buys (debit trades): Start at the mid or slightly better (lower)
For sells (credit trades): Start at the mid or slightly better (higher)

Example:

Bid: $2.00, Ask: $2.20, Mid: $2.10
Selling a spread: Start at $2.12 or $2.13 credit
Buying a spread: Start at $2.08 or $2.07 debit

This approach:

Improves your average fill price over time
Avoids “crossing the spread” unnecessarily
Still keeps you competitive for a fill

Using this approach, if the order fills at this limit price, then great, you got your fill at a “fair price.” If you don’t get filled, you can either wait, or adjust your order up or down to attract someone to meet your price.

Since we already said that our goal was to get a trade done, most likely we’ll give our order a few seconds to fill, then open our order and go through the process of cancelling and replace it with an order closer to the other side. Often after placing an order, the mid price changes because your order is now either the bid or the ask once it goes in. Meanwhile, other traders, including market makers may be adjusting their orders, so the bids and asks may have changed and moved away from you.

The process of entering your order near the mid price and adjusting time after time is often called price discovery. You are discovering the best price, which depending on the situation may be a moving target, particularly near the market open or close, or after a major news announcement. Patient price discovery works well in a quiet and non-moving market, while aggressive price discovery is needed for fast moving markets.

One final observation on working around the mid price. While the mid price is generally a very fair price in liquid options, non-liquid options are much harder to judge. When there are extremely wide spreads between the bid and ask prices, this means that there are probably no interested buyers or sellers active other than market makers. There may be much more interest on one side than the other, which is not obvious at first glance. A clue may be the last trade price vs the bid and ask, but unless that happened just recently, it may be irrelevant. So, what to do? If I’m buying, I’ll start where the highest current bid is, the bid price and start working up from there towards the mid and eventually ask price. I may get filled within a penny or so of the bid price, or I may have to do a lot of price discovery to get someone to sell to me. If I’m selling, I may start with the other sellers at the ask price and work my way down. I’ve found a lot of times when I’m rolling out in time on less liquid stocks to capture more premium, I often get filled very close to the ask price, but if I start at the mid, I’m likely to get filled at the mid price, because the market makers will often take what they can get from small traders. So for less liquid options, I try to do “better than mid.”

Walking Limit Orders: The Professional’s Tool

A tool I like to use when it is available is a walking limit option order. Currently, only a portion of brokers offer this type of automated service, and they can make it challenging. I got hooked on walking orders when I was using the now-defunct Schwab StreetSmart trading application. Schwab has added walking limit orders to other trading platforms, including the very popular thinkorswim.

What Is a Walking Order?

A walking limit order is a staged approach:

Start at your ideal price (often the mid or somewhat better)
If unfilled after a set time, adjust the limit toward the opposite side of the spread in small increments
Repeat until filled or until you reach your maximum acceptable price

Why Walking Works

Captures price improvement — you might get filled at a better price than if you’d gone straight to the ask/bid
Avoids overpaying/underselling in thin markets
Keeps you in control — you decide the pace and increments

Example: Manually Walking a Debit Spread Entry

Bid: $1.00, Ask: $1.20, Mid: $1.10
Step 1: Enter limit buy at $1.04
Step 2: Wait 15–30 seconds — if no fill, raise to $1.06
Step 3: Repeat in $0.01–$0.02 increments until filled or max price reached (e.g., $1.15)

Broker Automation

Some brokers allow auto‑walking:

You set start price, increment size, and time interval
The system adjusts automatically until filled or canceled
This is especially useful for traders who can’t babysit orders, or want to methodically discover price, but with a single order entry.

With auto-walking, brokers will typically limit how many increments you can set up in one trade, perhaps no more than 10. They may not allow the start and end price to be outside the bid/ask spread prices. And they definitely will force you to stick to increments no less than the tick size, or standard price increment for an option on a security.

For options on most underlyings these days, the tick size is one penny. You can’t enter orders for fractions of a cent. The most notable exception that I frequently trade is index options on the S&P 500 (SPX), which has options priced in 5 cent increments. Some futures options use fractional dollars, a hold-over from the days before decimal trading took off. So, the starting, end, and increment must be in amounts that match up to the tick size. For an example credit trade, a trader on SPX may have a starting price of $1.00, walk increment of 5 cents, and an end price of $0.60. Alternatively, the trade could have increments of 10 cents, which equals two ticks, but not 2 cents which is less than a single tick.

If walking orders sound a lot like what was earlier described as price discovery, that’s because it is. Automated walking orders are a way to automatically discover the best price. Manually doing price discovery can be a lot of keystrokes, and if you broker’s order entry and change process takes a lot of clicks, automated walking orders let you set up a single criteria and then just watch it go.

Occasionally, an automated walking order may not fill because the market moves away from your intended price as the limit walks for you and the end price of the walk still doesn’t get filled. When this happens, you can either start another walk, or perhaps evaluate whether you still want to do the trade.

I really like automated walking trades as a way to get the best fill I can. My only frustration is when the market is moving around so much that I can’t get my broker to accept an order that is the right number of increments inside the bid/ask spread, because the values are moving faster than I can enter them. If I get in that situation, I try to enter an order at a price I’d be happy with and then decide whether to work on setting up a replacement walking order, or to manually walk my order up or down to get filled.

General Thoughts on Liquidity, Spreads, and Fill Probability

Key Liquidity Factors

Open interest — higher is better
Volume — active contracts fill more easily
Spread width — tighter spreads mean less slippage risk

Adjusting Strategy for Liquidity

In highly liquid underlyings (SPX, QQQ, AAPL): Start at mid, walk slowly
In moderately liquid underlyings: Start slightly better than mid, walk faster
In illiquid underlyings: Consider whether the trade is worth the execution risk at all, and consider walking the full spread between bid and ask, understanding that you might not find a willing trader anywhere to take the trade.

One consideration with options that are not very liquid to get into is that almost all option positions are harder to exit than to enter. This is because most traders tend to open positions with an option order for something that is fairly liquid, even in a less liquid underlying security. But as the market moves, the option may end up deep in the money or way out of the money, and the volume will dry up and there will not be interest from others to give you a fair price to get out, even in the best of conditions.

When a trader gets stuck with an illiquid option and can’t get a price anywhere close to fair from the market for it, often the only choice is to exercise the option, or hold it until expiration. If that prospect is not appealing, don’t open a position in an underlying with poor liquidity.

Often, I find a stock with options that I think would be great to use options strategies on, but I open the option table and see that there is little liquidity, perhaps only a handful of open option positions or volume, or in a worst-case scenario, zero open contracts. I never want to be the only option contract holder, because I’ll never get a good fill to get out, and I probably won’t even get a good fill to get in.

Risk Management in Order Entry

When you enter an option order, you get to decide the parameters of the order. This is especially true when opening a position- if you don’t have a position, and you are looking to open one, you always have the choice of doing nothing if you can’t find a compelling trade to enter.

Even when you are exiting out of a position, you still have the ability to impact the outcome by picking the criteria for how the trade will go to the market. The decisions you make determine the urgency of the trade, or the ability to patiently get the best possible price. You always have some say in how the trade goes, as long as you understand the choices at your disposal.

In any case, there are some guidelines to keep in mind when entering trades to help manage risks of bad trades. I think of these as guidelines, not rules, because every situation is a bit different, and sometimes a situation is extreme and requires extreme measures. But knowing the risks of different behaviors in entering orders will make you a better trader.

Avoiding “Chasing”

Don’t keep raising your buy price or lowering your sell price beyond your pre‑set max/min — this erodes your edge.

In most cases, remaining patient is the best practice. Know what you expect from your trade and from what the market is doing and work to get the price you think is fair. Especially when you are opening a position, there is no excuse to chase a fill, because you can always wait for another time and another trade.

When the market is running away from your position, and you are losing money with every increment in price, and you have no choice but to get out, you may find yourself chasing the market. The sooner you realize that the market is running away from you, the sooner you can decide to either make a grand gesture and enter a price beyond where the market is to get a fill, switch to a market order, find a hedge for your position, or decide to sit on your position. Often in a situation like that, a trader looks for the least negative choice.

Using GTC vs. Day Orders

Day orders: Good for active management — expire if unfilled
Good Till Cancelled (GTC) orders: Useful for patient entries, but monitor for market changes

By default, most brokers set up an order to expire at the end of the trading day. If the goal is to get filled right away, this is fine, because you will cancel and replace the order if it doesn’t fill. For orders that are somewhat urgent, this setting doesn’t really matter.

However, if you want to set up an order to catch a specific high or low price, you may want to let the order sit for a while if it doesn’t fill. That’s where this setting comes into play. If you only want the order to fill during the current day for some reason, set the order to be a day order, and if it doesn’t fill, the broker will cancel it at the end of the trading day. If the order is for something even less urgent, like meeting a profit target that could take days or weeks, select Good Till Cancelled and the order will valid until the option expires or a set time passes- usually 90 days.

One unique situation where I like to place a Good Till Cancelled option order is when I have an option position that I want to roll out at a different strike price and I want to get a specific credit or maybe an even trade in the transaction. I expect that time will eventually make the premium price difference meet my target for the transaction, so I enter the target price and set the timing to GTC. Then I wait for the order to eventually execute. If it doesn’t, I may have to make a change if the conditions I expected didn’t happen after a few days or even weeks go by.

After Hours Trading

These days many brokers allow you to trade almost around the clock during the trading week. Usually, you have to select this as a choice when you trade because there may be an extra fee for this service, and markets are not very liquid when the exchanges are closed. Most options are not available for trading, although Futures options tend to be. Trading after hours can be convenient, but it can also be costly as market prices can vary widely and trading spreads are very much to the favor of market makers. Because of the illiquid market, I generally avoid after hours trading or entering orders to execute when the market is closed.

Multi-leg Option Order Considerations

Multi-leg option orders require special attention to execution method, pricing discipline, and liquidity. Unlike single-leg trades, fills depend on how the broker routes complex orders, whether you use net debit/credit pricing, and how you manage bid/ask spreads across all legs simultaneously.

The most basic question is whether to submit a package order or leg in.

Atomic execution: Submitting all legs as one “package” ensures simultaneous fills at a net price, avoiding slippage between legs.
Legging in: Entering each leg separately can sometimes improve fills but risks adverse price movement before all legs are complete.
Even if one leg is liquid, the least liquid contract often dictates fill quality.
Wide bid/ask spreads on far OTM strikes or long-dated expirations can drag down execution efficiency.

I almost always try to do an atomic order to start with and only resort to legging in if I can’t get my order to fill. Brokers allow entry as net debit/credit orders. This avoids chasing fills leg by leg. Always anchor to the mid-price of the net spread, then walk the order in small increments (e.g., $0.01–$0.05) to improve odds of execution.

Some brokers use complex order books (COBs) or RFQ systems that match multi-leg orders directly. Others may break them apart internally, which can lead to worse fills. Choosing a broker with strong multi-leg routing is critical.

Limit orders are essential; market orders on multi-leg trades can be disastrous due to compounded spreads. Timing matters: spreads often tighten during high-volume periods (e.g., first hour after open, last hour before close).

Multi-leg fills are sensitive to net delta, gamma, and vega exposure. Market makers price the package based on risk, not just leg-by-leg quotes. For example, a delta-neutral iron condor may fill closer to mid-price than a directional spread with skewed risk.

Multi-leg orders are usually “all-or-none,” but partial fills can occur if routed incorrectly. Always confirm your broker’s handling of partial fills to avoid ending up with unintended exposure. I’ve never had an issue with this, but I know a fellow trader that lost an extreme amount of money on a broken trade where the broker failed to execute one leg of his trade.

Think of multi-leg execution as negotiating a package deal. Anchor to the mid-price, walk the order slowly, and let liquidity come to you. Avoid rushing fills—patience often saves significant slippage.

Keeping a Log of Your Trades

Often, the final step in completing an option trade is to log your trade. Some traders question whether it is worthwhile to keep their own trade log when their broker already lists their trades for them. Why would a trader bother to create more work with their own trade log?

Great question — this gets at the difference between raw recordkeeping and usable intelligence. A broker’s log is essentially a compliance record: it shows what happened, when, and at what price. But a trader’s own log is a decision-making tool. Broker logs capture facts (time, price, quantity). Your log captures intent (why you entered, what setup you saw, what risk you accepted). Without context, you can’t evaluate whether a trade was good or just lucky.

A personal log lets you tag trades by strategy (e.g., covered calls, spreads, iron condors). You can measure win rates, average P/L, risk-adjusted returns by strategy — something broker logs don’t organize. I often set up separate logs for different strategies- this allows me to better analyze my results, as well as how closely I followed my mechanics. I often add additional information, like market level, or VIX level when the trade was opened or closed. With a personal log, a trader can track whatever data they think is important as part of the trade. Broker logs are fixed-format. Your log can include Greeks, margin impact, exit criteria, screenshots of charts, or notes for household/team reference — whatever makes the trade review binder-ready.

Broker logs won’t highlight execution mistakes (wrong strike, wrong expiration, fat-finger size). Your log can flag deviations from your plan and help prevent repeat errors. Trading success often hinges on discipline. Logging emotions, confidence level, or deviations from rules helps identify psychological patterns that affect performance.

Think of the broker’s log as the “black box flight recorder” — it tells you what happened. Your own log is the “pilot’s journal” — it tells you why you flew that way. Both matter, but only your log helps you refine and improve your system.

Putting It All Together: A Mechanical Entry Workflow

Check liquidity — OI, volume, spread width
Define your target price — based on mid and acceptable slippage
Place initial limit order — at mid or slightly better
Walk the order — in small increments, at fixed intervals
Stop at your max/min price — no chasing beyond plan
Log the trade — record the key parameters and fill price for review

Long‑Term Benefits of Disciplined Order Entry

Improved average trade pricing — boosts expectancy
Reduced slippage costs — compounds over hundreds of trades
Lower stress — you have a repeatable process
Better data — for refining your execution strategy

Conclusion

Order entry is not an afterthought — it’s a core trading skill. By defaulting to limit orders, anchoring to the mid price, and using walking orders where possible, you can materially improve your fills, reduce slippage, and trade with more confidence.