Fill or Kill Order - What Is It in Simple Terms?

Jakob Brezigar
Last updated: 05.02.2024
Reading time: 4 min

Ever felt like you’re on a dating app, swiping left because it’s not quite the right match, and then, suddenly, you find “the one” but they have to say yes instantly or it’s a no-go? That’s the thrill of using a fill or kill (FOK) order in the trading world. In simple terms, a fill or kill order is a high-stakes, all-or-nothing command to a broker: execute this trade in full and at once, or forget the whole thing ever happened.

What does a fill or kill order mean?

A fill or kill order is a trade instruction to execute a transaction immediately and completely at a specified price or cancel it altogether.

When should I use a fill or kill order?

Use a fill or kill order when you need to buy or sell a large quantity of stock instantly without partial fills.

Can a fill or kill order be partially filled?

No, a fill or kill order cannot be partially filled; it must be executed in full immediately or not at all.

How does a fill or kill order differ from other orders?

Unlike other orders, a fill or kill order combines immediacy and all-or-none conditions, requiring full and instant execution.

A fill or kill order is order that must be executed immediately and in its entirety at a specified price or it is canceled all together. If you don’t know this order type you may be missing on a huge opportunity that is providing for other traders and specialists. Make sure to read this article and hop on the FOK train to success!

Key Takeaways - Fill or Kill Order

A fill or kill (FOK) order must be executed immediately in its entirety at a specified price or it is entirely canceled.
It is an order type that is particularly useful for transactions involving a large quantity of stock, where even a slight change in stock price can significantly affect the outcome of the trade.
The nature of fill or kill type of orders makes them less common for the average investor but crucial for institutional investors or active traders who need to secure a large position without affecting market conditions.

How Crypto Market Makers Like Orcabay Benefit from Fill or Kill Orders

At Orcabay, we strategically utilize fill or kill (FOK) orders to enhance our market-making operations within the volatile crypto markets. On many instances we deployed FOK orders to capitalize on a fleeting arbitrage opportunity between two exchanges. This order type, which mandates the immediate and complete execution of the order or none at all, is crucial for us. It ensures that we only engage in trades that can be executed instantly at our desired prices, controlling slippage, thereby mitigating the risk of partial fills or fills at bad prices in fast-moving market conditions. The real benefit of employing FOK orders was vividly demonstrated when we secured a significant arbitrage profit in a matter of seconds, a feat only possible due to the all-or-nothing nature of FOK orders. This approach not only maximizes our trading efficiency but also significantly reduces our exposure to adverse price movements, making FOK orders an indispensable tool in our crypto trading arsenal.

What Is FOK Order?

A fill or kill (FOK) order is order that tells the broker to execute a trade at a specified price and in its entirety immediately or not to execute it at all. This type of order is particularly relevant in financial markets where timing and price can significantly impact an investor’s strategy. The essence of a FOK order is its binary nature: the entire order must be filled immediately at the stated price, or it will be canceled, leaving no room for partial fills or prolonged execution. If the market cannot accommodate the whole order instantly at the specified price, the kill aspect of the order comes into play, and the order is canceled.

Fill or Kill (FOK) Order vs. Immediate or Cancel Order

The FOK order is often compared to the immediate or cancel order, another order type that demands quick action. However, the immediate or cancel order allows for the partial fulfillment of the trade, executing whatever quantity of stock is available immediately and canceling the unfilled balance. In contrast, the fill or kill is more stringent, requiring the entire order to be filled immediately or canceled outright, reflecting its all-or-none nature.

Does FOK Order Execute Entire Order

Yes, the defining characteristic of a fill or kill (fok) order is its insistence on the complete execution of the entire order. If the entire order cannot be executed instantly at the market or a limit order price, the kill side of order is activated, and the transaction is canceled. This ensures that an investor’s strategy is not compromised by partial fills that could alter the intended impact on the market.

Pros and Cons of Fill or Kill Orders

Pros:

– Guarantees that an investor will not be left with an incomplete position.

– Avoids the risk of price fluctuation that can occur on the market with partial fills and prolonged execution.

– Useful for institutional investors who need to execute large trades quickly without causing market disruption.

Cons:

– Requires a high level of liquidity in the market to fill the entire order immediately.

– Can result in missed opportunities if the order cannot be filled at the specified price.

– May not be suitable for markets with less liquidity or for stocks that do not have large volumes of trading.

Understanding Fill or Kill

The fill or kill type of order is a powerful tool in the arsenal of an investor, particularly in volatile financial markets where the price of a stock can fluctuate significantly within a few seconds. This type of order ensures that an investor’s entire position is secured at a desired price without the risk of any part of the order being left unfilled, which could lead to market disruption or an unfavorable average entry price.

Is FOK Order Executed Immediately

The immediate execution of FOK order is a critical feature that distinguishes it from other order types. The order must be executed in its entirety and at the first bid or offer that meets the specified price, or it will be canceled. This immediacy is what makes the fill or kill a valuable option for investors looking to make a significant trade without the risk of a changing market price.

Fill or Kill Example

For instance, an investor may place a fill or kill order to buy 50,000 shares of a stock at a limit order price of $20 per share. If the entire order can be filled immediately at this price or better, the trade is executed. If not, the entire order is canceled, and the investor may choose to reassess their strategy or wait for more favorable conditions.

FOK and Stock Trading

In the context of stock trading, fill or kill orders are particularly useful for investors who need to secure a large quantity of stock at a specific price. These orders are a commitment to a trading strategy that does not tolerate partial fills or the risk of market disruption due to a prolonged execution time.

Fill or Kill vs Immediate Or Cancel vs All Or None

– Fill or Kill (FOK): This order type requires the whole order to be filled immediately at the specified price or it is canceled.

– Immediate Or Cancel (IOC): This order type seeks immediate execution for as much of the order as possible, with the remainder being canceled.

– All Or None (AON): Unlike FOK orders, AON orders do not require immediate execution but do require that the entire order be filled.

Summary

In summary, the fill or kill is a directive that ensures an investor’s trade is executed in its entirety and at a specified price without delay. It is a tool for those in the trading market who cannot afford the risk of partial fills or the impact of market price changes on their strategy. Understanding fill or kill orders is essential for investors who operate in fast-moving financial markets and need to execute large transactions immediately (all or none type of transactions).

Disclaimer: The information provided in this article is for informational purposes only and does not constitute financial, investment, or other professional advice. All opinions expressed herein are solely those of the author and do not represent the views or opinions of any entity with which the author may be associated. Investing in financial markets involves risk, including the potential loss of principal. Readers should perform their own research and consult with a licensed financial advisor before making any investment decisions. Past performance is not indicative of future results.