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What is a Buy Minus Order?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 16 November 2016
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    Conjecture Corporation
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A buy minus order involves the execution of an order to purchase a specific number of shares of stock or securities, with the stipulation that the order to buy stocks is not executed unless certain market conditions, in particular the stock price, come into existence. With a buy minus order, the market price is equal to or less than the price of the last trade for the same stock or security. Further, the price on the previous trade has to be a minus. In order to be a minus, the price on the last trade also has to be less and the minimum change in the stock price was either an uptick or a zero-plus tick. Many investors choose to buy stocks below market price, with a buy minus strategy specifically in mind.

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In order to enter a buy minus order, it is necessary for the investor to first look at the current market price of the security. This will provide the starting point for evaluating the performance of the security and determine if there is enough interest on the part of the investor to continue. Next, looking at the previous trading price will also factor into the decision, as this will be used in looking at the history of the security. What the investor is looking for is a trend in which there is a reasonable chance that the security will eventually trade at a price that is below the current market price. After reaching that lower price, the stock is anticipated to rise in value at a rate that is acceptable to the investor.

Generally, a buy minus order often is a good risk if the previous trade price is relatively close to the current market price. For example, if a stock is currently trading at $30.00 US Dollars (USD) per share, but was trading at $27.00 USD per share a short time ago, the performance may ideal for executing a buy minus order. This is especially true if there is reason to believe that the act of buying below market price will result in ownership of a stock that will rise to a point that will create revenue for the investor before leveling off again. A buy minus order is often considered a good way to realize a profit quickly, especially if the security is sold before the price peaks and begins to drop again.

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