Question

What scenarios can you imagine that might prompt someone to submit a market order on a certain stock?

Answer 1

A market order is a type of order to buy or sell a stock at the prevailing market price. Scenarios that might prompt someone to submit a market order include urgency, liquidity, and volatility.

Step-by-step explanation:

A market order is a type of order that an investor places to buy or sell a stock at the prevailing market price. There are several scenarios in which someone might submit a market order:

1. Urgency: If an investor wants to quickly buy or sell a stock without waiting for a specific price, they might submit a market order.
2. Liquidity: If a stock has high trading volume and tight bid-ask spreads, it's easier to execute a market order without significant price impact.
3. Volatility: In highly volatile market conditions, a market order can ensure prompt execution, but it may come at the expense of a less favorable price.

It's important to note that while market orders provide quick execution, the price at which the order is filled may be different from the current quoted price due to market fluctuations.

Answer 2

So, when were talking about a market order, we are talking about buying or selling an order to immediately at current market prices. So, we might want to imagine a scenario when the current market prices drop. However, we would always, in any scenario prioritize certainty of execution over the price of execution. The order is filled at the best price available at the relevant time.