﻿ Fractional Discretion Orders

# Fractional Discretion Orders

## Definition

The term fractional discretion order refers to broker instructions that allow modification of a buy or sell price within a fraction of a point.  Traders will place fractional discretion orders to guarantee execution.

### Explanation

If a trader would like to guarantee execution of an order, and has sufficient trust in their broker's judgement, they have the option of placing a fractional discretion order.  This type of trade gives the broker discretion to modify a buy or sell order by a fraction of a point.  In terms of stocks, a fraction of a point would be less than \$1.00.

As is the case with Not-Held orders, by placing their faith in the ability of a broker, the trader is also agreeing to hold them harmless if they need to use their discretion to execute the order.

### Example

A trader would like to buy 1,000 shares of Company XYZ's stock, which has a current market price of \$25.00 per share.  However, the company's stock price has been relatively volatile.  The trader trusts the judgement of their broker, so a fractional discretion order is placed to buy 1,000 shares of stock at \$25.00 with \$0.25 discretion.  This allows the broker to execute the buy order at a high of \$25.25 or a low of \$24.75.