Question

Buy 100 shares of ABC if the market rises to $45, but don't buy the stock for more than $50." What is the appropriate order to be placed

Answer 1

Buy ABC at 45 Stop 50 Limit

Step-by-step explanation:

Since the customer wishes to buy the stock if the market rises to $45 per share , the appropriate order to be placed is 'Buy ABC at 45 Stop 50 Limit'.

Here, a buy stop order is the only order that allows stocks to be bought at a price above current market price unlike a buy limit order that is placed below the current market price hence cannot be used.

In a situation where the market moves to $45 or higher, it becomes a market order to buy because it is elected. Suppose the customer is no more interested in paying above $50 per share, the order must be ' Buy 100 ABC at 45, Stop 50 Limit.