Question

You own 500 shares of Great, Inc. stock. It is currently priced at $50. You are going on vacation, and you realize that the company will be reporting earnings while you are away. To protect yourself against a rapid drop in the price, you place a stop-limit order to sell 500 shares at $40. It turns out the earnings report was not so good and the stock price fell to $30 right after the announcement. It did, however, bounce back, and by the end of the day it was back to $42. What happened in your account

Answer 1

It is likely I sold 500 shares between $40 and $42 per share

Step-by-step explanation:

Given that:

No of Shares owned = 500 Shares

Current Price per share = $50

Stop limit order price per share = $40

Thus, note that, Stop Limit order is a type of order that specify, the maximum amount at which an individual is willing to buy a stock i.e stop limit buy order or the minimum amount at which individual is willing to sell a stock i.e stop limit sell order.

Therefore, as I have placed a Stop limit sell price at $40, this implies that minimum price for the sale of share is fixed at $40, hence, if the selling price falls to $30, sale will not be executed.

However, Sale will be executed at $40 or more. Therefore, as the share price rose to $42 per share, it is likely I sold my share between $40 and $42

Hence, It is likely i sold 500 shares between $40 and $42 per share