Even Orders

What Are Even Orders in Options Trading?

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Even Order

An even trade in options trading refers to an options spread trade in which the value of the short leg completely offsets the value of the long leg resulting in zero cash paid nor cash received for making that trade.

Some brokers offer "Even" order alongside "Debit" and "Credit" order as a limit order type when trading options spreads. This means that when you select "Even", you won't need to specify how much debit or credit amount you wish to fill that options spread trade at because the options broker will simply attempt to fill the spread position at a price where the short and long legs offset each other completely.

As such, Even Orders are only applicable to trading options spreads and not to single leg options trades such as the long call, long put, short call or short put.

How Do Even Orders Work in Options Trading?

When you are putting on an options spread, which is an options position that consist of both long and short options contracts (Learn more about what Options Spreads are), you will usually see a variety of options orders available : Market, for simply filling all options contracts in the options spread at whatever price the open options market can fill at as quickly as possible. Limit Debit, for filling the options spread at no more than a definite debit price. Limit Credit, for filling the options spread at a definite Credit price (read about how Limit Orders work). Then there is EVEN, which orders the options broker to fill the contracts in the spread at prices that completely offset each other resulting in no cash payable for the trade (as in the case of a Debit Spread) nor cash receivable (as in the case of a Credit Spread).

Now, lets take a look at how even orders work in options trading!

The picture below is a Diagonal Call Time Spread consisting of buying the November $117 strike price call options of QQQ and at the same time shorting the October $116 strike price call options (read more about Short Options), known as a Nov117/Oct116 Diagonal Call Time Spread.

As you can see in the picture below, the price of the November $117 strike price call options is $2.98 (buy to open on the ask price) and the price of the October $116 strike price call options is $2.59 (sell to open on the bid price. Learn more about Options Orders). As such, selling the October $116 strike price call options could not give you enough cash to buy the November $117 strike price call options for free, as such, this is by default a Debit Spread which you can see in the NBBO qoute section in the picture below showing a debit of $0.39. This means that you need to pay $0.39 x 100 = $39 to put on this options position. What if you want to put it on for FREE since the price of both options are actually so close to each other? This is when you can choose the "EVEN" under the price order field.

After you select Even order, you can see that the "Estimated Order", which is the price you need to pay for the position becomes "$0" apart from the commissions. This means that if this options spread is filled, you will pay nothing more than the commissions as the options spread itself costs nothing, hence an "Even Trade".

Point To Note When Using Even Order in Options Trading

Even though you can select Even order for any kind of options spreads but, as you can see from the example above, it works best when the price of the short options and the long options are very close to each other. If you are doing a spread with the price of the long options and short options being very far apart, then there may be little to no chance at all for that options position to be filled under "Even" order.

An Even order aims to fill at $0 cash payable or recievable rather than just the bid price of the short leg completely offsetting the ask price of the long leg. When the number of contracts on the long leg and the number of contracts of the short leg is significantly different, using the even order will not instruct the options broker to merely achieve the same long ask and short bid price but rather the options broker will automatically aim for a much higher bid price on the short leg so that the cash received from the short leg completely offsets the cash payable

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