ability estimates are fraught with danger. By definition they are soft and unreliable. But forthe beginner they are better than nothing.63
Chapter 6
The process of back-testing trading rules or models is also fraught with danger. There is the tendency to “curve fit,” i.e., search for a trading rule until you findone that fits the data. Curve fitting is a self-fulfilling prophecy on a historical database. But because markets don’t read history and conditions seldom repeat exactly as they appeared before, such trading rules often turn out to be unsuccessful or,at least, less successful than planned.Trade small. Take little risks. Always set exit points to get out no matterwhat. Be a skeptic on your probabilities of success and allow plenty of cushion thatyour probabilities are wrong.
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The Trading Plan
Appendix I
The Trading Plan—Part IAm I Financially Suitable for Futures Trading and How MuchMoney Can I Afford to Risk on Futures Trading?The Income Statement(Average last 3 years)
Annual Income
My salarySpouse’s salaryInvestment incomeOther incomeA.Annual ExpenseMortgage paymentsInsuranceTaxesEducationSavingsLiving expensesVacationsLoan paymentsRetirement accountB.
TOTAL
______________________________________________________________________________________________________________
TOTAL
____________________________________________________________________________________________________________________________________________________________________________________________________________________________
C. Average annual net income available for investment (A – B):$______________________________________D. Percent of C to be committed to futures trading* ____________________E. C × D = $_______ – amount of income available for futures trading.*
The maximum proportion of your available investment income that should be committed tofutures trading will vary depending upon individual circumstances. Nevertheless, a prudentinvestor would not exceed 25 percent.
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Chapter 6
Personal Balance SheetMajor Fixed Assets
HomeOther real estateEquity in businessOther (describe)TOTAL
Major Liabilities
______________________________
Mortgage on homeOther mortgagesLoans
TOTAL
____________________________________
Liquid Assets
Cash in banksSavings accountsSecurities ownedOther (describe)TOTAL
______________________________
TOTAL Assets ($ _______) – TOTAL Liabilities ($ _____)= $ ________ Net Worth
SummaryMaximum amount available for futures trading:Net worth $Liquid assetsNet income
_______________
×××
_____ %* =_____ % =_____ % =
_______________
Which of these you select as your maximum depends on how you think areduction in one versus another will affect achievement of your short- and long-termgoals. Generally, it would be prudent to select the smallest of the three numbers.*
The maximum proportion of one’s net worth liquid assets or net income that one should committo futures trading will vary with one’s individual circumstances. Generally, however, it would beprudent to commit no more than 20 percent of net worth, 10 percent of liquid assets, or 25 percent of net income. Further, if you don’t have a net worth of at least $50,000 excluding yourhome, you probably should not speculate on commodity futures contracts. The exact amount thatis right for you depends on your family status, the extent to which the loss of the funds wouldaffect your long-term personal and family goals, your desire to take risks, your annual incomelevels, and your expected future income levels. For example, a man with a $100,000 income anda net worth of $200,000, two kids in high school and two in college, two homes, and several clubmemberships is probably less able to take risks than a 30-year-old bachelor earning $35,000 peryear and a net worth of $25,000.
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Trading Plan—Part IIInitiating A PositionI.
The commodity I am interested in trading is: ______________________The contract month I like is: __________________________________II. Market Analysis:COL. 1COL. IICOL III SCORE*Are the supply/demand factors:___ Bullish___Neutral___ Bearish ______Is the seasonalinfluence:___ Bullish___Neutral___ Bearish ______In relation tohistorical pricelevels, is thecurrent price:___ Bullish___Average ___ Bearish ______Have recentgovernmentreports been:___ Bullish___Neutral___ Bearish ______Are the chartpatterns/technicalanalysis:___ Bullish___Neutral___ Bearish ______TOTAL** ______* AssignthefollowingpointsforeachcolumnCOL. I = 2 points, COL II = 1 point, COL. III = 0 points**Use the following scale for assessing the expected market direction:BULLISH10 9 8 7Consider buying
III. Expectations:Expected Price ChangeProbability of Occurring
NEUTRAL654Do nothing
___10%___75%
checked.
BEARISH3210Consider selling
___5%–10%___51%–75%
___0%–5%___10%–50%
If you expect less than a 5 percent change in price, or if you think the probability of achieving the expected price change is less than 50 percent, you areprobably better off not taking a position. If you feel you have more than a 75percent chance of getting at least a 10 percent change in price, you probably67
Chapter 6
have a good possibility for a successful trade. In between those extremes is yourbest judgment as to whether you think the risk is worth the potential reward.IV. ActionBased on what I know about market factors, I will take the following position:I will ____________________ () quantity ___________________(buy) (sell) (stand aside)
(month)
____________ at ____________ and will enter a STOP at _____________(commodity)
(price)
(price)
Trading Plan—Part IIILiquidating a PositionThe PlanI (will) (will not) maintain my position into the delivery month. Therefore, mymaximum date beyond which I will not hold this position is: ________.A. My target price(s) for liquidation is___contracts @ ___________contracts @ ___________contracts @ ________B. If I achieve my target prices(s) I willhave a net gain on the transaction of________________________C. The probability of achieving the net gain is________________________D. If the market moves against meand my stop orders are executed,I will suffer losses of________________________E. The probability of my suffering such losses is________________________Given these circumstances, the most Icould expect to gain on average over along run from these transactions is(B × C) – (D × E) =________**
If this number is not positive, do not make the trade. The greater this number, assuming the probabilities you assigned are correct, the greater the reward you can expect relative to the risk andthe more certain you can be that the trade will be successful.
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The ResultsI did liquidate my position at:
___ contracts @___________ contracts @___________ contracts @________My gain on the transactions was:________I paid commissions of:________Interest not earned on my margin money was:________*My net gain (loss) on the transaction(s) was:________This represented a ______% return on my margin money.* This is an opportunity cost. You could have invested the money in a savings account or someother investment.
Trading Plan—Part IVEvaluation of PlanOverall, my plan reflected what I actually did___ Quite Well
___ Fairly
___Poorly
The mistakes I made were ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________
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Chapter 7
Choosing a Broker
“My advice to a prospective trader is to get the facts, make sure he has emergencyfunds and an understanding spouse, and then get a good broker.”Not long ago, a speaker at an afternoon seminar on futures wound up hisspeech with the above advice. The first question that came from the audience was,“I’ve already got the spouse, the savings, and the experience. How do I find a goodbroker?”The questioner raised two important points. First, he pointed up the variationthat exists among brokers in the commodity futures trading industry. Secondly, heplaced his finger on one of the decisions that puzzles most new traders, i.e., whatdo you look for when selecting a broker?Several years ago, psychologist William G. Baker III of the University ofSan Francisco conducted a study of stockbrokers in an attempt to identify the personality traits of successful brokers. He ascertained that brokers who are mature,stable, sociable, self-controlled, enterprising, aggressive, ambitious, competitive,and outgoing are much more likely to have customers who make money; customers whose brokers have the opposite traits or possess only a minority of thesetraits are more likely to be losers. Although Dr. Baker’s research is directly appli71Copyright 2001 The McGraw-Hill Companies. Click Here for Terms of Use.
Chapter 7
cable to the stock market, it has strong implications for selecting a commodityfutures broker as well.Look for someone who fits the description above, but who also fits your personality, can give you guidance, and is willing to provide you service. Look for aprofessional.
WHERE TO BEGINMany people are reluctant to enter a broker’s office, even out of curiosity. Studiesshow that this attitude stems largely from an unfounded belief that the public is notparticularly welcome. The typical descriptions given by many new customers uponvisiting a broker’s office for the first time are: “active,” “confusing,” “unfriendly,”“noisy,” and “no privacy.” Nevertheless, most brokers will welcome your visit;after that initial visit you will probably deal mostly with your broker via phone, fax,and mail.If you already have a stock account with a brokerage firm, your present broker can introduce you to one of the people in the office who specializes in commodities. If the firm doesn’t trade in commodities, your broker might be able torecommend a commodity specialist in another firm.If you don’t know any brokers to contact, there are several ways to approachthis decision. You might ask friends who already trade commodities about their brokers. You could contact an exchange and ask for a list of firms that handle commodity trades for customers, then give one or several of them a call. You could simply select the names of firms from the yellow pages under “Commodity Brokers.”Or you might attend a seminar or lecture program sponsored by various brokeragehouses. These are usually advertised well in advance in local newspapers and aregenerally free. Most brokers are selected with someone’s help. Studies done by theexchanges reveal that nearly half of all customers are obtained by referral.
WHAT TO LOOK FORThe best way to evaluate brokers is to visit them in their offices. Think twice beforeyou open an account with a broker you’ve never seen. There’s no substitute for aface-to-face meeting.One of the most important things about a broker are his credentials. Is heregistered with the National Futures Association (NFA) and operating under the rulesof the Commodity Futures Trading Commission (CFTC) in Washington, D.C.?How much experience does he have as a commodity representative? Has he beenqualified to handle accounts by a training program? Is he familiar with the literature on commodity futures trading?72
Choosing a Broker
You should also find out how much time your prospective broker devotes tocommodities. The picture changes rapidly in the futures markets. He should bewilling and able to devote the time necessary to follow the fast-moving markets.If you consider it necessary, a quick check on the broker’s background canbe made by calling the NFA at 800-676-4632 to determine if he is currently a registered representative in good standing or if he has any outstanding legal actionspending. Registration is required by law.A broker should know about the materials available from the exchanges, theUSDA, and other sources. Some excellent work on commodity futures trading andanalyses of individual markets has been done by the U.S. government and schools suchas Stanford, University of Illinois, University of Wisconsin, Cornell, Texas, et al. Abroker should be able to guide you to those materials, as well as some of the excellent books that have been written in recent years about commodity futures trading.A good broker will answer your questions directly and honestly, includingtelling you “I don’t know, but I’ll find out” when he doesn’t know.It has often been said that brokers who also trade for their own accounts areless desirable, because they suffer a loss of objectivity. Raymond Ross, in his doctoral dissertation completed at the University of Illinois, found otherwise. He founda high positive correlation between the net trading results of broker/solicitors andthe results of the customers’ trading. Brokers who made money trading for theirown accounts tended to have customers who made money, and vice versa. Further,his research showed that the overall net trading results of customers of non-trading broker/solicitors tended to be much worse than those of brokers who also traded for their own accounts.
CONSIDER THE FIRMIn selecting a broker, one also must look beyond the individual to the firm. Doesthe office have good communication facilities for keeping posted up to the minuteon prices? What sort of research facilities does the firm have, and how good arethey? Surprisingly little has been done to appraise the real value of commodityfutures research. Thus, you’ll have to make your own judgments. You can probably judge this best by comparison with other firms. It is a good idea to ask to beplaced on the mailing lists for research reports and “market letters” from morethan one firm, and then make a comparison over time. Obviously it’s unfair toevaluate this research and advice solely on the basis of whether the firm was rightor wrong in the market during some short time period. No one bats a thousand. Butyou can compare the firms on the basis of the depth and quality of the research andask yourself if the conclusions reached are based on sound reasoning. Good researchfacilities are important. Ross’ study also found that speculators who followed“house” research advice made money on two-thirds of their trades.73
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It could be that you will not want to rely solely on your broker or the firmfor research. Perhaps you intend to do your own, or you may want to utilize oneof the many independent commodity futures research firms that issue daily orweekly advisory letters to clients. The fees for these advisory services range froma few dollars a month to hundreds of dollars a year. The quality of the research andadvice varies almost as much.If the brokerage firm you choose is some distance away, inquire about beingable to call them collect or get their toll-free number. This is a courtesy most firmsoffer their customers.One of the most disappointing things that can happen to new traders is tofind that after they’ve opened accounts and made a few small trades, their brokerslose interest in them. One man recently complained, “My broker never calls me.As a customer, I don’t like that. I like to think he cares about me and my money.”Your broker should keep an up-to-date log on your account and should havethat log at his fingertips whenever you call. When you ask your broker a questions about your account, he should be able to discuss with you without hesitationyour position in the market, your trading objectives, stops you have placed, and otheraspects of your account. Your broker should know what commodities you are interested in, and keep you up to date on the latest news of importance in those commodities.Another very important service a broker can provide is to help you developa trading plan. In fact, to test the kind of service you will receive from a broker,ask him to help you develop such a trading plan. He should know how to do it,should have some simplified forms for planning, and should be able to discusswith you all of the major points we discussed in Chapters 4 and 6.It almost goes without saying that you should expect fast and reliable execution of your orders. If you know people who have accounts with a broker, askthem about the order execution they’ve received from the broker and the firm.Failure to execute orders quickly and accurately is inexcusable, and a sure sign thatyou should look elsewhere for your broker. Equally important is fast and timelynotification of price and quantity transacted.
WHAT NOT TO LOOK FORTo this point, it sounds as though the broker should be all things to you. But thereare certain things a broker cannot do and which you should not expect. A brokercannot, without legal power of attorney from you, make trading decisions withoutyour prior approval. This means that when giving a broker an order for execution,you must make sure he understands exactly what you want done.
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Choosing a Broker
A broker cannot promise you profits. In fact, brokers are guilty of violatingcertain exchange rules, NFA rules, and a Commodity Futures Trading Commissionguideline on advertising if they do not, when discussing profit possibilities, mention the equal opportunity for losses.A broker does have other customers to think about and can’t spend all of histime pondering your account or discussing it with you on the phone.A broker is also human, and no matter how experienced and diligent, canfrom time to time err in estimating the situation.
PROBLEMSThe world is made up of many different kinds of people—some good, some bad,and some in between. So it is with commodity brokers.Some “bad” brokers take a very short-term view of things and are more interested in getting the immediate order without giving proper thought to whether thatparticular transaction is appropriate for their customers. Some brokers care less aboutlong-term service and more about immediate commissions.The encouraging aspect of this situation, however, is that those people arebeing gradually eliminated by natural market forces (their customers leave them)and by the stringent requirements imposed by the NFA and CFTC.If misunderstandings should arise or mistakes be made by one party or another, the first place to go with a complaint about a broker is to his immediate superior. Most complaints are settled there. If you’re right, a settlement of the disputewill be made to compensate you. If further action is necessary, both the exchangeon which the transaction was made and the NFA have departments to receive andinvestigate complaints about broker activities. Both are impartial in these investigations and are deeply committed to fairness and action, when and if guilt is established. However, they need evidence, and the burden of proof is on the customerto show that the broker acted improperly.The Commodity Futures Trading Commission Act of 1974 required the commission to establish a reparations procedure for customers who felt they had beendefrauded of their funds or in some other way injured financially by persons registered under the act. Such a procedure was established in early 1976 and notification of your rights to use reparations should be included in the papers you signwhen you open your account.Finding a good broker is not difficult, if you know what you’re looking for.A true professional—one who is interested in providing quality service—canstrongly enhance the profitability of your futures trading.
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OPENING THE ACCOUNTOnce a broker has been selected, it’s relatively simple to open an account. Generallyit’s a case of filling out some forms and depositing some money.The first form a customer will usually be asked to complete is a new accountinformation form. This asks for the usual personal information, including references(personal and credit), type of account (regular commodity account or managedaccount), instructions on sending notices and statements, and your signature.Brokers also must furnish customers with disclosure documents explainingthe risks of futures trading and also must give customers the opportunity to selectarbitration or mediation rather than a civil lawsuit as a method of settling disputes.There is also a customer agreement form. This gives the broker authority toliquidate any positions outstanding if the proper margin requirements are not met.The amount of money that needs to be deposited depends on the individualbrokerage house. Very few will open an account for as little as $5,000. Most insiston an initial deposit above $10,000.
TYPES OF ACCOUNTSThe type of accounts opened may vary, e.g., there are joint accounts, sole proprietorships, partnerships, corporate accounts, and managed accounts. A managed ordiscretionary account is an account in which the customer signs a power of attorney to the broker or someone else, giving them the right to make trades for theaccount without first obtaining approval from the customer on each trade. Don’topen such an account unless you know the person and the organization and haveconfidence in their integrity and ability. Most exchanges have set up special rulescovering such accounts.Many firms also offer guided account programs. A guided account programis one that is essentially managed by a brokerage firm employee, but the customeris required to approve each transaction in advance of execution. Normally, thecustomer is called and consulted before each trade.Guided accounts and managed accounts have special appeal and are particularly suited to those people who feel they don’t have the time or expertise to manage the accounts themselves and would prefer to have someone else do it for themor at least help them do it. A person seeking such services also may want to consider some of the commodity funds or pools, limited partnership arrangements, oreven computerized advisory services.Most brokerage houses have established and are marketing commodity funds.Just as the name suggests, an individual can buy an interest in the fund and participate in the profits or losses of the fund activity in proportion to his ownership76
Choosing a Broker
in it. These usually operate as limited partnerships composed of an establishednumber of limited partners and a general partner. Each of the limited partnersassumes limited liability for any losses incurred by the partnership. That liabilityis limited to the investment made. The general partner, however, has unlimitedliability.The attractive thing about limited partnerships and commodity pools is thatthe individuals investing in them, except for the general partner, have limited liability; they can lose only the amount they have invested. And when a group ofpeople pool their funds, it provides some efficiencies in the management of themoney and ensures a sufficiently large sum of money so that the account has greater“staying power” than any one of the individuals might have if they were tradingseparately.You should be wary of participating in any of these ventures without thoroughly examining the background of the individuals managing the account and therules and procedures under which the fund’s assets will be invested (see Chapter 4).It’s hard to pick up a financial newspaper today without encountering an adfor someone selling a computerized commodity futures trading advisory service.Some people are attracted to the mystique that is associated with computer technology. The advent of the computer as a trading tool was inevitable. The computer is a very efficient means of analyzing large amounts of data and of testing alarge number of trading strategies to identify those which seem profitable.Nevertheless, the computer is not better than the person programming it. “Garbagein, garbage out” is an old saying in the computer industry.Before you lay out very much money for computerized advisory services,check carefully into their past record of achievement. Many such programs arevery simplistic and rely heavily on technical analysis largely because the rules ofthumb generated by technical analysis are easily programmable on the computer.The more sophisticated and better programs rely on a combination of technicalanalysis and fundamental analysis. In addition, the good models are sophisticatedenough that they contain internal feedback procedures whereby the computer learnsfrom its experience. Thus, as the economic environment changes, the model in thecomputer conducts trial and error procedures to identify those parts of the modelthat must be updated to reflect things learned from past experience. These typesof models, which have been used successfully to teach a computer to play chesswith such skill that even expert players lose to it, are now finding their way intothe futures trading field.If you’re looking for outside advice and management help, check carefullyinto what you’re getting before you sign a contract. And, most important, watchthe size of the management fee.
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Chapter 8
The Order
One of the most important and perhaps least understood aspects of commodityfutures trading is the order that customers give to their brokers to assume or closea position in the market.An order is, by definition, an instruction given by a customer to his brokerdirecting the broker to buy or sell a particular futures contract or contracts duringa certain time interval. Within these two broad categories of buy and sell orders,however, is a wide variety of order types, each with a specific purpose. So let’sexamine the above definition, one phrase at a time, to see how each works.
TIME ELEMENTTime is an aspect of all orders, and there are several ways in which timing may bespecified when placing an order.“Day” orders are good only for the day they are placed. If not executed, theyexpire at the close of trading on the day on which they are entered.
79Copyright 2001 The McGraw-Hill Companies. Click Here for Terms of Use.
Chapter 8
“Open” orders remain in effect until either executed or canceled or until thecontract expires.“Good ’til canceled” orders are the same as open orders.“Good through (date)” orders remain in effect until the close of business onthe date specified. Variations include orders that are “Good for this week” or “Goodfor this month.”“Time-of-day” orders call for execution at a specific time or specific intervals during the trading session. For example, “Sell two July pork bellies at themarket at 11:30 a.m.”“Off-at-specific-time” orders are similar to “day” orders, but have an addedtime contingency in that they remain in effect only until a specified time during thetrading session. If the order is not executed by that time, it is automatically canceled. For example, “Sell two May pork bellies at 55.00. Good ’til 12:00 p.m.Chicago time.”“Fill-or-kill” orders are those to be executed at a specific price or better,immediately upon receipt in the pit on the exchange floor. If the order cannot beexecuted immediately, it is canceled, and the customer is notified of the latestquote. These are also sometimes referred to as “immediate or canceled” orders or“quick” orders. Such orders must be filled in total or in part immediately uponreceipt. Any part of the order not filled immediately is canceled automatically.“On-the-opening” orders must be executed during the opening of trading,which is a short period of time usually counted in minutes at the beginning of theday’s trading during which an opening price range is determined in the trading pit.If not filled then, the orders are canceled.“On-the-close” orders must be executed during the closing of trading, whichis a short period of time again measured in minutes or fractions of minutes at theend of the day’s trading activity. If not executed before the closing bell, the ordersare canceled.Note: Some brokers and some exchanges will accept only certain types oftime-contingent orders. Check with your broker on which he allows. Also, mostbrokers automatically cancel all open orders at the end of each month.
PRICEIn addition to the time element, all orders must include instructions as to the priceat which the transaction is to be made. The order may designate a specific price atwhich it must be executed, or it may leave the price to be determined by the market. A number of alternative types of price instructions may be used.The one with which most traders are familiar is an order to buy or sell “at themarket.” “Market” orders are to be executed at the best possible price obtainable at thetime the order reaches the pit. Example: “Buy two Feb. pork bellies at the market.”80
The Order
“Limit” orders are those to purchase or sell futures at a designated price orbetter. If it is a limit order to buy, the price designated must be below the currentmarket price. If it is a limit order to sell, the price designated must be above thecurrent market price. A limit order enables the customer to execute a transactionat a better price than that prevailing at the time the order is entered, if the marketprice reaches (actually trades or is bid or offered at) the level specified. Of course,the customer takes the chance that his order will not be executed because the pricelevel designated for execution is not reached.A limit order never becomes a market order. For example, consider the limitorder, “Buy two May pork bellies at 54.50 limit.” This transaction will be madeonly at a price of $54.50 or less. If it had been, “Sell two May pork bellies at 54.50limit,” the transaction would be made only at $54.50 or higher.A “market-if-touched” order is one to buy or sell futures “at the market,”when the price reaches the specified level. This order is similar to a limit order inthat the designated price to buy must be below the current market price and the priceto sell must be above the current market price. Unlike limit orders, however, market-if-touched orders are always executed if the price moves to the designatedlevel because they become market orders at that time. An example of such an orderis, “Buy two May pork bellies at 54.50, market-if-touched.”
STOP ORDERSA “stop” order is one to buy or sell at the market when the market reaches a designated price. They are referred to as “stop-loss” orders when placed to close outa position in the event prices move against the trader. A stop order to buy must beentered above the prevailing market price. A stop order to sell must be enteredbelow the prevailing market price. It is these two characteristics that distinguish astop order from a market-if-touched order.A stop order to buy or sell at a specified price does not guarantee, however,that the order will be filled at the price specified, even though the market sells oris bid at the stop price. If the market is moving quickly and passes through thestop before the broker has a chance to execute the order, the execution price maybe higher or lower than the stop price.Stop orders are used for three purposes: to protect the profit on an existinglong or short position; to initiate a new long or short position; or to stop losses byclosing out an unprofitable long or short position. An example of a stop order is,“Buy two May pork bellies at 54.50, stop.”A “stop-limit” order is one that has a designated limit above which the customer will not buy and below which he will not sell. A stop-limit order enables atrader to take advantage of the stop order, yet also be sure of getting a price within a definite range. Stop-limit orders may be executed when the price is bid at or81
Chapter 8
above the stop price, but they cannot be executed outside the limit specified. Ineffect, once a stop order is elected, it becomes a limit order. For example, “Buy twoMay pork bellies at 54.50 stop, limit 54.80” means that if the market sells or is bidor offered at $54.50, buy two May pork belly contracts. If you can’t get them doneat $54.50 or better, keep trying to buy them up to a price of $54.80, but in no eventbuy them at a price above $54.80.“Scale” orders are orders to buy or sell two or more lots of the same commodity at designated intervals. For example, “Buy two May pork bellies at 52.50and one each 1/2-cent down for five” is an order to buy two May pork bellies at$52.50 and then one more each as the price declines by 1/2-cent intervals until thetotal of five additional contracts has been purchased.
COMBINATION ORDERSCombination orders are two orders that are entered at the same time, with the cancellation of one contingent upon the execution of the other. A combination orderalso may be an order to buy or sell one commodity at a specified price in onemonth when prices reach a specified level in another month or in another commodity. However, commodity brokers who accept combination orders assume noresponsibility for simultaneous or exact price execution, because it is physicallyimpossible for a broker to be in two places executing two orders at the same time.Combination orders may be classified as “alternate” orders and “contingent”orders. Alternate orders are a group of orders entered at the same time with instructions that, upon execution of any one of the orders, all remaining orders are canceled.Example, “Buy two May pork bellies at 54.50 or two July pork bellies at 55.00.”Contingent orders are entered with the understanding that the execution ofone order is dependent upon the execution of the other. They are also referred toas “when-done” orders. These orders may instruct the simultaneous purchase andsale at a stipulated price, or they may instruct the execution of one part of the orderbefore the other part of the order is considered entered.