All Or None (AON)

All or none (AON) is a directive used on a buy or sell order that instructs the broker to fill the order completely or not at all. If there are too few shares available to fill the order entirely, the order is negated when the market closes.

An AON order is considered a duration order because the investor gives instructions to the trader regarding how the order has to be filled, which affects how long the order remains active.

Suppose an investor places an AON order to purchase 200 shares of Microsoft common stock at $100 per share, which means the order is not to be filled unless all 200 shares are purchased at $100. The investor has specified both the number of shares and the price required to fill the order. Two hundred shares is a trivial number of shares to purchase when compared with the daily trading volume of Microsoft stock, so it is likely the order will be completed if the shares trade at $100 during the day.

More substantial AON orders, however, are more difficult to fill, because the order composes a greater percentage of the amount of shares traded daily. While Microsoft may trade at $100 a share, it would be more difficult to purchase 100,000 shares at $100 using an AON order than it would be to buy 200 shares.

Many portfolio managers use technical analysis, defined as the scrutiny of stock price patterns and trading volume, and this strategy may necessitate an AON order. When a stock price trades above or below a range of trading, the price may indicate a future trend. Suppose, for instance, that a stock trades between $20 and $25 per share for several weeks, but then rises to $27. Technical analysts call this trading pattern breakout, meaning the share price continues to climb. A portfolio manager can place an AON order, which requires the entire order be bought at the $27 breakout price, thereby allowing the manager to generate profit from the upturn in price.

Portfolio managers also use fundamental analysis, which can be defined as a study of a company's financial statements and financial ratios. Managers compare the financials of a company to a similar business in the same industry, which can often help reveal as a buy or sell signal. As they do with technical analysis, portfolio managers use AON orders to buy and sell stocks based on fundamental analysis. Assume, for instance, that the price-to-earnings (P/E) ratio for the overall technology sector is 30 times earnings, and that Microsoft's P/E ratio is 20x ($100 stock price / $5 earnings). Microsoft's lower P/E ratio means that the company is generating more earnings per share, which makes the stock's price more attractive than other firms in the industry. Therefore, the manager uses an AON order to buy 5,000 shares of Microsoft at $100 per share since its P/E ratio indicates a buy signal.