Greetings! In today’s blog, we will be discussing the concept of After Market Orders (AMO) in share market trading. We will dive into what an AMO order is, how it works, and its benefits. We will also compare AMO orders with regular market orders, and discuss the best AMO strategies. Additionally, we will also touch upon AMO orders for options, and the charges associated with them. So, let’s get started and learn more about AMO orders and their impact on your trading experience.
What is an After Market Order?
After Market Order (AMO) is a feature that brokers or brokerage agencies offer, allowing investors to purchase or sell shares after the stipulated trading hours. In India, stock markets start working at 9:15 AM and close at 3:30 PM daily, Monday through Friday. The orders placed post this timeframe are categorised as ‘After Market Orders.’
You can call AMOs ‘advance orders’ made after the stock exchange’s closing but processed at regular trading hours on the following day of order placement. The facility is accessible on the shares of specified companies. This feature renders investors who fail to find time during market hours to participate in the growing stock market. Notedly, After-Market Orders are referred to as market orders, so you cannot put a stop loss, bracket, or cover order on them. Though, placing a limit order on AMOs is permissible.
How does an After Market Order work?
The After Market Order is perfect for those juggling their primary job and stock market investments. It is quite simple to use and is a feasible option for people with limited time to spare. Let’s understand the working of an after-market order through an example.
For instance, you decide to place an After Market Order for 50 shares of a company named XYZ on NSE at 8:00 PM. This order is at market price. The AMO order you placed goes to your broker and stays as such until 8:58 AM of the next trading day. At 9:00 AM the next day, the broker sends the AMO order to the stock exchange.
Once the stock exchange starts operations at 9:15 AM, your order gets placed at the opening market rate. Suppose you placed a limit order of INR 2000, and if the price gets matched in the pre-opening market between 9:00 AM to 9:07 AM, your AMO order will get processed during that period. If not, the order gets processed after 9:15 AM.
In the case of limit AMOs, the extent to which you can place the order depends on the broker. Some brokers allow investors a 5 per cent up or down from the closing price to place a limit order. For example, if the closing price of a share is INR 500, you can place a limit order in the range of INR 475 to INR 525.
What is AMO order time in India?
The After Market Order time in India is from 3:45 PM to 8:57 AM, Monday through Friday, except for trading holidays. Any AMO placed during this time will get processed during the regular trading hours of the following trading day.
What is AMO order?
After Market Order (AMO) is a facility that brokers offer to their clients, allowing them to buy or sell shares even after the stock market’s stipulated trading hours. These orders are processed during the regular trading hours of the following trading day.
AMO order charges
Most brokers do not charge any extra fees for placing AMOs. However, it would be best to confirm with your broker before placing an AMO.
AMO order strategy
AMO order strategy involves the placement of limit orders, which helps investors avoid unfavourable market situations. The best part of AMO orders is that you can always cancel or alter them at your convenience, giving you more control over your investments.
AMO order – Benefits:
investors who cannot trade during regular market hours due to other commitments can take advantage of this feature. It helps them avoid time restrictions and participate in the Indian stock market. AMOs can be canceled or altered at any time, providing a safeguard against unfavorable events that might affect the dynamic stock market. They are also accessible for all stock market categories, including equity, F&O, Forex, and commodities.
AMOs are a convenient way for traders to place orders after market hours and take advantage of market movements that may occur overnight or during non-trading hours. Traders can use AMOs to place orders for CNC, MIS, and NRML trading and specify the order type, quantity, and price. Once the market opens, the order will be executed if the specified price is reached.
AMO Order – Cons:
Low liquidity due to low-volume trading, leading to erratic prices that might make it difficult to fill orders. The quoted prices are also not the consolidated prices offered during regular trading hours. Moreover, AMOs are not allowed for Bracket orders and Cover orders, and they do not support Stop-Loss orders which can lead to higher competition due to limited stock volume, triggering market volatility and inducing losses for beginner investors.
In summary, placing stop loss, bracket, or cover orders on them is not possible. But, placing a limit order on AMOs is allowed.
Trading Strategies for AMO Orders
To minimize risk, here’s a trading strategy that takes into account the potential for lower volume, wider spreads, and significant price changes:
What are pre-market and post-market sessions and orders in NSE and BSE?
Before placing an AMO, identify the price range at which you want to enter and exit the market. It’s important to set realistic targets and to be prepared to adjust them as needed, given the increased volatility during after-hours trading.
Consider smaller position sizes:
Given the added risk of trading during after-hours, consider using a smaller position size than you would during regular trading hours. This will help to minimize potential losses and to preserve your trading capital.
Monitor the market closely:
Keep a close eye on the market during after-hours trading to monitor any significant price changes or unexpected news that could impact your trade. Consider setting up alerts or using stop-loss orders to help manage risk.
Be prepared to adjust your strategy:
Given the increased risk and volatility of after-hours trading, it’s important to be flexible and willing to adjust your strategy as needed. This might mean adjusting your entry and exit points, changing your position size, or even exiting a trade if conditions warrant.
How should you place an AMO Order?
To place an AMO, select the product and order type, and click on Buy or Sell. The timings for placing AMOs vary by segment, and orders are executed once the market opens. You can place AMOs at any time during weekends and trading holidays, but they cannot be placed between 01:00 AM and 05:30 AM due to scheduled maintenance.
When placing an AMO, keep in mind that they are sent to the exchange at specific times depending on the segment and order type. For example, Equity – Market and Limit orders are sent at 09:00 AM while Equity – IOC validity, Disclosed quantity, Stop loss, Stop loss – Market are sent at 09:15 AM.
The products discussed in Benefits & Cons:
Cover Order
Cover Order (CO) is a type of order that includes a stop loss order along with a market or limit order to mitigate risk. With a CO, you can determine your maximum loss in advance, even if the trade moves against you.
Bracket Order
A Bracket Order is a type of CO that allows you to place two opposite orders from a single order panel. For instance, you may place a Buy order bracketed by a high-side sell limit order for profit booking and a low-side sell stop loss order.
Cash and Carry
Cash and Carry (CNC) is a product type used for delivery-based trading in equity. In delivery-based trading, you intend to hold the stocks overnight for as long as you wish. Using CNC, you will not receive any leverage, nor will your position be auto-squared off. However, you will not be able to take any short positions using CNC. You can sell the stocks from your holding using this product type.
Note that CNC is just a product type, and if you use CNC to buy and sell a share on the same day, it will still be considered an intraday trade, and the brokerage will be levied as per intraday trading.
Margin Intraday Square Off
Margin Intraday Square Off (MIS) is used to get intraday leverage. The MIS product type can only be used for trading Equity, Equity F&O, Commodity futures, and Currency futures. You can check the margins provided for intraday trading using the MIS product type on our Margin Calculator. All open positions under the MIS product type will get automatically squared off if they are not closed before the auto-square off time. You can check the auto-square off timings by clicking here.
NRML
Normal (NRML) is used for overnight trading. The NRML product type can be used for trading Equity, Equity F&O, Commodity futures, and Currency futures.
Popular FAQs
1. Why did my index option AMO market order get rejected?
There could be several reasons why an index option AMO market order was rejected, including insufficient funds or margin, incorrect order details, or technical issues. It’s important to double-check your order details and ensure that you have enough funds or margin to cover the order before placing it. If you continue to experience issues, you may want to contact your broker or exchange for further assistance.
2. Why is the error “The market order was rejected since there are no trades in this instrument. Try placing a LIMIT order” displayed?
This error message typically appears when attempting to place a market order for a low-volume or thinly-traded instrument. In such cases, it may be necessary to place a limit order instead, which allows you to set a specific price at which you’re willing to buy or sell the instrument. This can help ensure that your order is executed at a fair price.
3. Why was the account in a negative balance after the market order was executed?
If your market order is executed at a price that’s significantly different from the current market price, this can result in a negative balance in your account. This can happen if there’s a sudden change in market conditions or if the instrument is particularly volatile. To avoid this, you may want to consider placing limit orders or using other risk-management strategies, such as stop-loss orders.
4. Why can’t AMO orders be placed beyond today’s circuit limits?
Circuit limits are price bands set by the exchange that limit the maximum upward or downward movement of an instrument’s price during a trading session. These limits are typically set based on the instrument’s volatility and can change from day to day. Because AMO orders are executed when the market opens the following day, it’s not possible to place an order that exceeds today’s circuit limits.
5. What are pre-market and post-market sessions and orders in NSE and BSE?
The pre-market and post-market sessions refer to periods of trading that occur before and after the regular trading hours on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). During these sessions, certain types of orders may be placed, including AMOs and limit orders. These sessions can be useful for traders who want to react to news or market events outside of regular trading hours. However, it’s important to note that these sessions typically have lower liquidity and wider bid-ask spreads, which can make trading more challenging.
AMO in Options Trading
Options trading is a complex and risky financial activity, and different brokers may have different rules and procedures regarding AMOs. It is important to understand the risks and potential benefits of placing an AMO, and to consult with your broker or financial advisor before making any decisions.
Perks
Some potential advantages of using AMOs in options trading include the ability to react quickly to market news or events that occur outside of regular trading hours, and the potential to take advantage of price movements that occur overnight or over weekends.
Cons
However, there are also risks involved with placing AMOs, including the possibility of lower liquidity and wider bid-ask spreads outside of regular market hours, which can make it more difficult to get a good price for your options.
Conclusion
However, it is important to note that the rules and procedures for AMOs in options trading may vary between brokers in India. Some brokers may have specific guidelines on the types of options that can be traded through AMOs, the maximum quantity of options that can be bought or sold, or the time period during which AMOs can be placed.
Additionally, there may be higher risks associated with AMOs in options trading in India due to lower liquidity and wider bid-ask spreads during the pre-market session, which can make it difficult to get a good price for your options.
