You own Volatile inc. stock and are concerned about a significant drop in price

Question

You own Volatile inc. stock and are concerned about a significant drop in price if their earnings announcement is less than expected. In addition, you are concerned that if earnings fall short of investor expectations, program trading will drive the price down even further and in a shorter period of time. To protect your investment you are considering placing a stop-loss order or a stop limit order. which do you believe would be the best strategy given your concerns? Is there another strategy that you think would be better than a stop-loss or stop limit order?

Explanation / Answer

In the given situation Stop Loss order is the best strategy.

Because it will protect the long positioin by triggering a market sell order if the price falls. If the price falls the loss will be capped by selling at the order price

Stop Loss order is the best strategy

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