Close by order
Family II · Orders
Not to be confused with delivery order, sell stop order, stop loss order.
Close by order is an order whose sole purpose is to exit a position that is already open. It does not create a new exposure and does not alter the size or direction of an existing one; it reduces the position to zero. The term is most common where a platform distinguishes order types by intent rather than by execution mechanics.
How it works
A close by order is submitted against a specific open position, not against the market in general. The broker or platform matches it to that position and offsets it, so the resulting exposure is nil.
Execution is normally at the current bid for a long position and the current ask for a short position, though the exact price convention varies by venue. Some platforms treat a close by order as a distinct order type; others implement the same result through an opposite-side order of equal size, which is functionally equivalent but recorded differently.
Because the order only reduces exposure, it cannot be filled in a size larger than the position it targets. Partial closes are handled by specifying a quantity smaller than the open position, leaving a residual position behind.
Worked example
Commission, financing and any applicable taxes are deducted from the gross figure; the exact charges vary by broker and jurisdiction.
Points of variation
- Order type naming. Not every platform lists a close by order as a separate type; some require an opposite-side order instead.
- Price convention. Whether the bid or the ask is used depends on the direction of the position and on the venue.
- Settlement. The time taken for the realised result to appear in the account balance differs between brokers and instrument classes.
- Partial closes. Minimum residual sizes, if any, are set by the broker rather than by a universal rule.
Often confused with
- delivery order
- A delivery order is an instruction to a broker to take physical delivery of the underlying asset rather than closing the position for cash before expiry.
- sell stop order
- A sell stop order is a conditional instruction to sell a security once its price falls to or below a specified stop price, at which point it becomes a market order.
- stop loss order
- A stop loss order is an instruction to buy or sell a security once its price reaches a specified stop level, at which point it becomes a market order executed at the next available price.