Trading, Accounts & Prohibited ActsQuestion 177 of 398
An investor bought a stock at $30 and it now trades at $45. She wants to limit her downside by triggering a sale if the price falls to $40. Which order should she enter?
a.A buy limit order at $40
b.A sell limit order at $40
c.A sell stop order at $40
d.A market order at $40
Explanation
A sell stop order placed below the current market becomes a market order to sell once the stock trades at or through the $40 stop price, protecting accumulated gains. A sell limit at $40 would execute only at $40 or higher and would not protect against a decline.
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