Trading, Accounts & Prohibited ActsQuestion 217 of 398
A stock is trading at $48. An investor believes that if it breaks above $52 it will continue climbing, and wants to buy automatically at that point. Which order accomplishes this?
a.A buy limit order at $52
b.A sell stop order at $52
c.A buy stop order at $52
d.A sell limit order at $52
Explanation
A buy stop order placed above the current market ($52, above $48) triggers a purchase once the stock trades at or through $52, letting the investor enter on upside momentum. A buy limit at $52 would instead try to buy at $52 or lower and would fill immediately below the market.
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