16 Placing a Trade

fill restrictions

1. fill-or-kill (FOK) order 2. immediate-or-cancel (IOC) order 3. all-or-none (AON) order - only apply to limit orders b/c market order is always filled at best available price immediately

time restrictions

1. good 'til cancelled (GTC) order 2. day order 3. market-at-open or market-on-close order

or better

- buy limit order: at the limit order or lower - sell limit order: at limit price or higher

market order

- buy or sell order - at best available market price

stop limit order

- buy or sell - this order type has stop price and does not become "live" working order until the stock trades at/through the stop price - also has a limit price: once the order is "triggered" by reaching stop price, the order becomes a limit order to buy/sell at specified limit - like any other limit order, it may/may not be executed depending on where price of stock is

Fill-or-Kill (FOK) Order

- instruction to fill (execute in its entirety) the order immediately or kill (cancel) the order completely - there can't be partial executions with this type of order

market at open or market on close order

- market orders designated to be executed at the opening of the day or close of the day - depending on the market (Exchange or OTC) the order is being sent to, the customer is not guaranteed the exact opening/closing price, but instead a price at (or close to) the first/last price of the day

stop order

- trade order does not become "live" working order in marketplace until stock trades at/ through a specified price (stop price) - once order is "triggered" by stop price, the order becomes a market order, and - executed immediately at best available market price

Narcissus, Inc., a social media company, has shares selling at $52. Your customer likes the company but thinks it is currently a bit too high and would like to buy the stock if the price declines to $50 per share. Which of the following orders meets this customer's request? A) Buy limit @ 50 B) Buy puts with a 50 strike C) Buy stop at 55, limit 50 D) Buy stop at 50

A) Buy limit @ 50 - buy limit @ 50 = broker to buy at price of $50 or better - entering buy stop at 50 would trigger order immediately, becoming a market order to buy at the current price - the stop limit would not trigger until the stock rose to 55, then it would be an order to buy t 50, so the stock would have to rise to at least 55 then drop to 50 or below - owning the puts gives him the right to sell the stock at the strike of 50 not buy it

The market for Dizzy Rides Inc., is at $52 per share. Your customer would like to sell his shares for $55, and believes the stock will climb to that level in the next two to three weeks. What order should he place? A) Sell limit 55 GTC B) Sell limit 55 FOK C) Sell limit 55 AON D) Sell limit 55

A) Sell limit 55 GTC - only the Good-Til-Cancelled (GTC) will live past today - all others (FOK, AON, sell limit) will cancel if unexecuted by the end of the day

An order that when triggered becomes a market order is called a A) stop limit order. B) limit order. C) stop order. D) market order.

C) stop order.

A bearish sentiment means that a person believes A) the security will increase in value. B) the company will devour its competition. C) the firm appears to be slow and lumbering. D) the security will decline in value.

D) the security will decline in value.

A client entering a sell limit order at 43 would accept which of these trades? A)42 B)42.90 C)42.50 D)44

D)44 - sell limit at 43 = investor will only accept price of 43 or better (higher)

An investor has her registered representative enter a sell stop limit order at 50. Following the order entry, trades occur at 52, 50, 49, 51, and 53. The investor would receive A)50 B)49 C)53 D)51

D)51 - this is two orders: - the first STOP is at 50 - once the stock trades at 50 or lower, the order is triggered and becomes a live working order - order is to sell at 50 or better - the following price is 51 - the next acceptable price after the order is triggered and is then executed

limit order

a request to buy or sell a stock at a specified price - maximum purchase price (buying) - minimum selling price (selling)

day order

a trading order that expires at the end of the trading day during which it was made

ABC stock is currently trading at $63. Julia Miller would like to purchase ABC stock, but not at $63. if the price of ABC stock were to fall to $58 or less, then Miller wants to buy the stock. which type of order should miller place considering her objective? a. market order b. buy limit c. buy stop d. buy stop limit

b. buy limit - for a buy limit: "or better" = at the limit price ("or lower") - limit orders can only be executed at the limit price designated by a customer or better

your customer places a trade to buy 1,000 shares of Seabird Airlines at a limit of 32 FOK. When the order reaches the floor of an exchange, there are 500 shares available to buy at 32. what is the likely outcome of the trade? a. 500 shares filled, 500 share order remains until filled of canceled at the end of the day b. 500 shares filled, the rest of the order is cancelled c. 500 shares filled at 32, 500 at the market d. order cancelled, done nothing

d. order cancelled, done nothing - there are not 1,000 shares to buy - in FOK, if it doesn't reach entire order, ti must be cancelled

when an investigator is long a stock, a. the investor is bearish b. buying the stock in the secondary market will close the position c. there is limited gain potential d. the investor is bullish

d. the investor is bullish - long stock: the stock is purchased and owned - owning a stock is bullish (anticipating rise in value) - if it rises, position can be closed by selling it in the secondary market for a profit - there is no limit to how high the price can go, profit is unlimited

bullish

A market view that anticipates higher prices. - ex: long a stock

bearish

a market view that anticipates lower prices - ex: short a stock

Your customer, Ellesha, places a sell stop at 50 on DEZ stock while it is trading at $53 per share. After the order is elected, Ellesha may sell her shares at which of the following prices? I. $48 II. $49 III. $50 IV. $51 A) I, II, III, and IV B) I and II C) III and IV D) I, II, and III

A) I, II, III, and IV - sell stop - once triggered (elected), this becomes a market order to sell - market orders may sell at any price

Narcissus, Inc., a social media company, has shares selling at $50. Your customer is bearish. He would like to sell the stock short, but not until it retreats at least 10% from its current price. In order to catch the drop he could A) enter a sell short at stop 45. B) enter a buy stop at 45. C) enter a sell long at 50. D) sell calls at strike price of 45.

A) enter a sell short at stop 45. - uncovered call does not help - if exercised, he would have to buy the shares before he delivers them, leaving him flat (no position) - the buy stop at 45 would trigger immediately and would become a market order to buy - as there is nothing that indicated he owns the shares now, the sell long would be rejected - the sell stop short at $45 would become a market order to sell the stock short when it trades at 45

All or None Order (AON)

An order that instructs the firm to execute the entire order or not at all - differ from FOK: Firm does not have to execute immediately - can be held until end of day (for day orders) or beyond (for GTC orders) until they can be filled in their entirety

Immediate or Cancel order (IOC)

An order that instructs the floor broker to execute it immediately, in full or in part. - partial execution is acceptable

Your customer places an order to buy 500 shares of Narcissus, Inc., (the ticker is NCS) at $50 per share fill-or-kill (FOK). When the order is entered, there are 450 shares available at $50 per share. What happens to the order? A) She will buy 450 shares, and the remainder of the order remains open until filled. B) The order will be canceled and nothing is done. C) She will buy 450 shares, the rest of the order will be canceled D) She will do nothing, but the order stays open until the end of the day if more inventory becomes available.

B) The order will be canceled and nothing is done. - FOK order: has to be filled in its entirety and immediately; if there is insufficient shares available, it will be cancelled immediately

Your customer is quite nervous about the stock market but expresses his belief that equities are still the place to save for retirement over the long term. He places a trade for 500 shares of an equity index fund. Overall your customer is likely A) unsure of where the market is going. B) a bull. C) a tiger. D) a bear.

B) a bull. - he expressed confidence in stocks and invested money to back his belief - he is bullish because he believes these equities will grow

GOOD-TILL-CANCELED ORDER (GTC)

Order to buy/sell at a specified price remains in effect until it is executed or cancelled - all orders are automatically cancelled if un-executed on last business day of April and last business day of October - if customer wishes to have the order remain working beyond those specific days, the customer must request that order continue for the next cycle