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 placed after the market closes and executed when the market reopens. Investors and traders who can't monitor the market throughout the day often use this order. 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 placed after market hours and processed during the pre-opening window or once the market opens the next day.

Once an individual places an AMO, the broker holds it until the market opens the next day. If the price set by the individual is matched during the pre-opening window, the order will execute then; otherwise, it will execute once the market opens.

Although you cannot place a bracket, cover, or stop-loss order as an AMO, you can set a limit or market after-market order. A limit AMO executes when a particular price is matched, while a market AMO executes 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): 3:40 p.m. to 8:58 a.m.

F&O: 3:40 p.m. to 9:10 a.m.

You can place AMOs on the MXC during market hours. If you place an AMO before the market closes, it will execute on the next trading day.

An example can help clarify an AMO.

Trader A wants to buy 100 shares of XYZ company. However, it is 4:00 p.m., and the market has closed for the day. Trader A places a limit AMO to purchase 100 shares of XYZ at ₹50 per share. The broker holds this AMO until 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 execute 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, market participants can modify it at any time, giving them 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 be beneficial, keep the limitations and risks in mind before placing an order.

• AMOs may face liquidity issues due to lower trading volume. This can make it difficult to buy 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.
• You cannot place a cover, bracket, or stop-loss order as an AMO.
• Order rejections are always possible 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 most common 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 because of higher volume and fewer 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. You can place a GTT at any time during the day, but it executes only during market hours. Meanwhile, an AMO is valid for only one day and executes once the market opens.

AMO vs OCO

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

Who Should Use AMO?

AMO is suitable for investors and traders who don't have time to monitor the market constantly. An AMO lets a trader buy 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

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

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

Ensure your order executes correctly when the market opens the next day.