Question

A customer, concerned about a possible pull-back in XYZ stock, instructs her broker to "Sell my XYZ stock if it falls to 40, but I don't want less than 39.75 for my shares." The broker should enter:______.a. market order to sell.b. sell stop order.c. sell stop limit order.

Answer 1

Answer:

c. sell stop limit order.

Explanation:

In this case, a stop order would be issued by a client that instructs his/her broker to sell the stock if the price falls below $40.

But this is a stop limit order because the client has instructed specifically that he/she will not accept a stock price lower than $39.75. A stop limit order sets an specific price limit that the customer will be willing to accept.