What Is an After Market Order (AMO)? Meaning & How It Works

If you’ve been around the markets, you have definitely placed or heard of orders like a buy order, a sell order, or a stop-loss order. Another common type of order is an after market order (AMO). An after market order is an order that is placed after the market closes and is executed once the market reopens. This order is often used by investors and traders who are unable to monitor the market throughout the day. In this article, we will explore the uses, benefits, and risks of after market orders.

How does AMO work?

As the name suggests, an after market order is an order placed after market hours and is processed during the pre-opening window or once the market opens on the next day.

Once an individual places an AMO, it will be held by the broker till the market opens on the next day. If the price set by the individual is matched during the pre-opening window, the order will be executed then; otherwise, it will be executed once the market opens.

Although it is not possible to place a bracket, cover, or stop loss order as an AMO, one can set a limit or market after market order. A limit AMO is executed once a particular price is matched, while a market AMO is executed at the prevailing market price.

Traders and investors can place an AMO on exchanges such as the NSE, BSE, and MCX. However, it is important to know the timings for the various segments during which an AMO can be placed.

Given below are the timings for placing AMOs:

Equity (NSE & BSE): 3:45 p.m. to 8:58 a.m.

F&O: 3:45 p.m. to 9:10 a.m.

Currency: 3:45 p.m. to 8:59 a.m.

AMOs on the MXC can be placed during market hours. If an AMO is placed before the market closes, it will be executed on the next trading day.

We can better understand an AMO with an example.

Trader A wants to buy 100 shares of XYZ company. However, it is 4:00 p.m., and the markets have closed for the day. Trader A places a limit AMO to purchase 100 shares of XYZ at ₹50 per share. This AMO is held by the broker till the next day. If the order price is matched during the pre-opening window, which is open from 9:00 a.m. to 9:07 a.m., the order will be executed then. If the order is not executed during the pre-opening window, it will be executed at 9:15 a.m. when the market opens.

Benefits of Using AMO

An after market order can be a handy tool for investors and traders.

• AMOs allow individuals who cannot constantly monitor the markets to place orders, enabling them to invest and trade at their convenience.
• After an AMO is placed, it can be modified at any time, giving market participants greater flexibility.
• Traders and investors can use AMOs across various segments, including equities, derivatives, currencies, and commodities.
• Individuals can place an after market order even on weekends or trading holidays, making it suitable for busy individuals.

Limitations and Risks

Although an after market order can prove to be beneficial, one should keep the various limitations and risks in mind before placing an order.

• AMOs may face liquidity issues due to lower trading volume. This makes it difficult to purchase or sell shares as intended.
• Due to lower volume and erratic price movements, it might be challenging to fill the order at the desired price.
• Overnight risks might lead to significant price movements, resulting in AMOs being filled at unfavourable prices.
• It is not possible to place a cover, bracket, or stop-loss order as an AMO.
• There is always a risk of order rejections due to factors such as higher volatility outside trading hours or lower liquidity.

Here are some common reasons for failures or order rejections: 

• Insufficient Funds/Securities: The commonest reason for order rejection. You should always have sufficient cash/margin balance to purchase or a sufficient volume of available shares to sell when the order is processed.
• Price Outside the Exchange-Specified Range: If there are limited orders, and the market price at the opening does not improve upon/reach your specified limit, the order will not be executed or cancelled. Brokers may also impose price-range limits on AMO limit orders. 
• Disallowed Market Orders: For certain instruments, such as illiquid stocks or index options, brokers or exchanges may disallow market orders to prevent extreme price movements. 
• Trade Bans or Surveillance: Orders for stocks already under particular surveillance or facing F&O bans may be rejected. 
• Other Issues: These include incorrect order timing (trying to place the AMO during regular market hours or within scheduled maintenance windows), technical issues, specific broker restrictions on stocks/segments available for AMO, and mismatches in order details including issues with the disclosed amount not being a multiple of the lot size in question.

AMO vs Other Order Types

Let’s look at how an AMO differs from other standard order types.

AMO vs. Regular Market Orders

A regular market order is placed during market hours and executed then. These orders are easily filled due to higher volume and lower liquidity constraints. An AMO is placed after the market closes and executed the next day when the market opens. AMOs might face challenges filling due to lower liquidity and higher price volatility.

AMO vs. GTT

A good till-triggered (GTT) order is valid for a year and is executed when the order conditions are met. The GTT can be placed at any time during the day, but is executed only during market hours. Meanwhile, an AMO is valid only for a day and is executed once the market opens.

AMO vs OCO

One-cancels-other (OCO) is a type of order in which one leg of the order is cancelled if the other leg is triggered. If the stop-loss is hit, the target order will be cancelled, and vice versa. It is not possible to place such orders in an AMO.

Who Should Use AMO?

AMO is suitable for investors and traders who do not have the time to monitor the market constantly. An AMO allows a trader to purchase or sell shares as soon as the market opens. An AMO is not suitable for intraday traders or scalpers who aim to enter and exit positions quickly, during market hours.

Best Practices for Using AMO

While placing an AMO, one should analyse the price charts and market news to gauge how the stock will perform on the following day.

Make sure to keep a stop loss in place while placing an AMO.

Ensure your order is executed correctly once the market opens the next day.