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.

Answer 1

Stop loss , Stop buy

Explanation:

Let us understand the term stop-loss order:  

· This is an “order sited” with the “broker to buy or sell” once the stock reaches a certain amount or price.

· This is “designed to limit” an investor's loss on a security point.  

· Fixing a stop-loss order for “20% below the price” the margin which you have bought the stock will “limit your loss to 20%”

Let us understand the term buy stop order:

It guides a “broker to purchase a security” when it reaches a strike price that is higher than the “current spot price”.