Question

If an investor places a _________ order, the stock will be sold if its price falls to the stipulated level. If an investor places a __________ order, the stock will be bought if its price rises above the stipulated level.
A. stop-buy; stop-loss
B. market; limit
C. top-loss; stop-buy
D. limit; market

Answer 1

Answer: Option C. Stop-loss; Stop-buy

Explanation:

Stop Loss is an automatic order to buy or sell an instrument once its price reaches a specified level, commonly known as ‘the Stop Price. The order is executed automatically, which saves you having to constantly monitor your deals. It also serves as protection from excessive losses. A buy stop order instructs a broker to purchase a security when it hits a strike price that is higher than the current spot price. Once the price hits that strike, the buy stop becomes a market order, fillable at the next available price.