MINDTAP Different trade orders such as market order, Imit order, stop loss order
ID: 2820503 • Letter: M
Question
MINDTAP Different trade orders such as market order, Imit order, stop loss order etc are created to give investors the lberty to manage their secarities based on their expectations out of the investments ack purchased 250 shares of an exchange traded fund (ETF) specializing in the health care sector for $125.24 per hare. Jeck is comfortable holdng on to his shares in the face of mnor Suctuations, but does not want to risk the share value faling far below his purchase price. He therefore considers plading a shares would be sold i the share price falls to $120.00 order so thet all 250 The following graphs depict two hypothetical paths for the share value of lack's ETF over the course of the next six months. Complete the sentences below each graph to describe what would happen f Jack placed the preceding order under each of the two dircamstances SHARE VALUE SHARE VALUE 150 140 130 130 100 MONTHS IN FUTURE MONTHS IN FUTURE In the preceding scenario, his order would be activated In the preceding scenario, his order would be activated and executed at and executed at ; thus the order would ; thus the order would over the over the six month period. six month period True or False: If instead the stock price had nsen steadily and never fallen below120.00, placing the order would have acted as a safeguard but would have had no real effect O False O True MacBookExplanation / Answer
1:Stop-loss
(Under this arrangement the order would be executed when the price falls below a certain level to avoid losses to the investor)
2: BOTH GRAPHS
Order would be activated IMMEDIATELY
And executed at $120
Thus the order would be executed over the 6 month period
3: True
Placing the stop loss order would only be executed if the price falls below $120. In the scenario that the prices are rising steadily, the stop loss will avoid losses but will not have any effect since it will not be executed.
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