When I was looking to enter into a straddle I noticed that my broker has market order, Limit Credit, and Limit Debit. Can someone explain what the limit credit and limit debit means and how to enter those orders? Thanks
When you enter a spread order, you are either entering a debit spread or a credit spread. Debit means that you are paying a premium. Credit would mean that you are receiving a premium. So lets take a straddle for example. If you are buying a straddle you are paying a premium, so it would be debit order. If you were writing or selling (shorting) the straddle it would be a credit order.
Since yours is a debit, here is probably what they want you to do. Let’s say the straddle you want to purchase calls for you to buy a call for $100 and a put for $100. So your straddle costs $200. From what you indicated, your broker probably wants you to place an order to buy the straddle (the call and the put) for, say, a $200 Limit Debit. That means you won’t pay more than $200 plus commissions for the straddle.
If the above isn’t clear and consistent with your broker’s order screen, call your broker and have them explain it to you.