After Market Order

What is an After Market Order (AMO) in the share market?

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 ₹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% up or down from the closing price to place a limit order. For example, if the closing price of a share is ₹500, you can place a limit order in the range of ₹475 to ₹525.

Features of using after-market orders

The characteristics of After Market Orders (AMO) are as follows:

1. Market or Limit Orders: The flexibility to place market or limit orders is offered by AMOs. letting investors select the execution manner that they want.

2. Modification and Cancellation: Investors retain control over their trading choices even after placing orders by having the ability to change or cancel their AMOs.

3. Bracket and Cover Order Exclusion: The range of accessible order types is limited because AMOs, in contrast to conventional trading sessions, do not enable bracket orders or cover orders.

4-Lack of Stop Loss and Disclosed Quantity Orders: Two common order types in regular trading, stop loss and disclosed quantity orders, are not supported by AMOs.

5. Exchange-Specified Price Range: To ensure openness and compliance with regulations, the exchange sets the price range for limit orders in AMOs for a particular stock.

Types of After Market Order work

There are a few varieties of After Market Orders that you should be aware of:

1. Market orders: These instruct your broker to purchase or sell an asset at the going rate in the market.
A market order in after-market trading indicates that you wish to close the deal as soon as possible and take advantage of the best price that is available at that moment.
Remember that the real execution price could be different from the most recent traded price because speed takes precedence over pricing.

2. Limit Orders: Limit orders enable you to specify a price range at which you are prepared to purchase or dispose of a security.A limit order in after-market trading indicates that you have established a minimum selling price or a maximum purchase price.
Only in the event that the price hits your designated level during the After Market session will your limit order be filled.

3. Stop Orders: These are useful tools that can be used to initiate a transaction at a specific price level or to hedge against possible losses.When your stop price is achieved during after-market trading, your stop order turns into a market order.
A stop order to sell should be placed at a price lower than the going rate. Place a stop order over the going rate for a purchase.

Benefits of using after-market orders

●    After Market Orders allow people who can't trade or invest during regular market hours owing to other commitments a fair opportunity to do so. They help investors avoid time restrictions and participate in the Indian stock market. 
●    One of the best features of AMOs is that you can always cancel or alter them at your convenience. It safeguards you from unfavourable events that might affect the dynamic stock market.
●    AMOs are accessible for all stock market categories, including equity, F&O, Forex, and commodities.
●    The Indian stock market does not work on Saturday and Sunday, but you can place an AMO on these days and training holidays without any trouble. 
●    AMOs can be placed for a variety of trading alternatives, including equity delivery, referred to as Cash and Carry (CNC), Margin Intraday Square Off (MIS), and Normal Order (NRML). 

Risks of using after-market orders

●    Usually, after-market orders involve low-volume trading. The limited trading volume makes it difficult for traders to purchase or sell shares, especially stocks of top-performing companies. Thus, there is low liquidity in the case of AMOs. 
●    In AMOs, you fail to get shares at the best market price. The quoted prices are not the consolidated prices offered during regular trading hours. 
●    They are not allowed for Bracket orders and Cover orders. Also, AMOs do not support Stop-Loss orders. 
●    Limited liquidity leads to erratic prices, which might make it difficult to fill orders.
●    After-market orders have higher competition due to the limited volume of available stock. This situation can trigger volatility in the market and induce losses for novice investors.
 

How to place an after-market order

●    Log in to your brokerage account by filling in the information the platform requests. 
●    Search the shares of the company you are planning to invest in from the list displayed on the screen. 
●    Choose between the Buy or Sell options available there.
●    Pick the type of trade you are looking forward to, such as MIS, CNC, etc. 
●    Tap on the AMO option viewed on the screen. 
●    Choose if you want to place a Limit Order or Market Order.
●    Fill in the share quantity you are planning to trade. In the case of Limit Order, provide the trade price. 
●    Click on the Buy or Sell option.  
 

Tips for using after-market orders

Business entities provide information, in advance, about the release of earnings and whether there will be after-market trading available to investors. Most trading and stock charting platforms also publish a list of pre-market and after-market orders. You can confirm your eligibility for the same by contacting your broker. 

Drafting a specific strategy before investing funds in the stock market is always advised. The same principle goes for after-market orders. Ensure your strategies have extra room for adjustment to lower volume, increased spreads, and significant price changes. A check on these factors will leave stop losses fruitless, meaning a higher risk of losses. Thus, consider opting for a smaller position size during after-hours trading than normal trading hours. 
 

Comparison with regular market orders

Conclusion

The Indian stock market restricted people from trading beyond normal trading hours earlier. However, the scene has changed completely today with the introduction of AMOs. After Market Orders have become an essential part of the Indian stock market. Investors with limited time can reap the benefits of the share market because of AMOs. This facility allows investors to trade during the after-market hours and pool profits from strategic investments. The facility helps to provide seamless access to profitable investment options with minimum effort and ease.