The term buy minus order refers to broker instructions to purchase a stock at a price that is below the current market. Buy minus orders can also be combined with limit orders, and are placed by traders hoping to take advantage of a short-term decline in a stock's price.
A trader will issue a buy minus order to their broker when they would like to purchase a stock under very specific circumstances. Generally, there are two market conditions that can result in the execution of a buy minus order:
When combined with a limit order, the trader can effectively place an upper threshold value on the acquisition price of the stock.
A trader would like to purchase shares of Company XYZ, but she would like to take advantage of a near term decline in the price of the company's stock. The trader places a buy minus order for 1,000 shares of stock at a limit price of $20.00; however, the current market price is $20.50.
This trade will execute if the price of Company XYZ's stock ticks down to $20.00, or moves past $20.00.