Stop Limit Order

C is correct. A sell stop-limit order with a stop at $60 and limit at $58 best meets Maria's needs. When ABC falls to $60, the order triggers and becomes a limit order to sell at $58 or better, ensuring she won't sell below her $58 floor. This provides the downside protection she wants while respecting her price requirement. However, Maria should understand that if the price gaps down from $60 to below $58 (e.g., drops to $55 suddenly), the order will not execute and she'll still hold shares that have fallen below her acceptable price.

A (sell stop order at $60) would trigger at $60 but become a market order, potentially executing at any price below $60, including well below her $58 minimum (perhaps at $55 or lower in a fast market). This doesn't provide the price protection she requires. B (sell limit order at $58) would only execute at $58 or better, but provides no downside protection if the stock never reaches $58. If ABC falls from $62 to $50 without touching $58, the limit order never executes. D (market order) would sell immediately at the current market price (~$62) with no downside protection, not meeting her objective of protecting against future declines.

B is correct. When a stop-limit order reaches the stop price (trigger point), it becomes a limit order at the specified limit price. This means the order will only execute at the limit price or better, providing price protection but no guarantee of execution. The order remains active as a limit order until it executes, expires, or is canceled.

A describes what happens with a regular stop order (not stop-limit), which becomes a market order upon trigger and executes at the best available price. This is the key difference between stop orders and stop-limit orders. C is incorrect because stop-limit orders do not automatically cancel when triggered; they become active limit orders awaiting execution at the limit price or better. D incorrectly describes a stop order with day duration, not a stop-limit order. Stop-limit orders become limit orders (not market orders) and can have various time-in-force instructions (day, GTC, etc.).

C is correct. The order executes at $71.50. Here's the sequence: DEF falls from $75 to $74, then $73. When it reaches $72 (the stop price), the stop-limit order is triggered and becomes a limit order to sell at $70 or better. The next trade in the sequence is $71.50. Since this is a SELL limit order at $70, "or better" means $70 or HIGHER (better for the seller). $71.50 is above $70, so the order executes at $71.50, achieving a better price than the $70 minimum the investor specified.

A is incorrect because the order does not execute immediately at $72. At $72, the order only triggers and becomes a limit order; execution depends on finding a buyer at $70 or better. B is incorrect because the order would have already executed at $71.50 before the price fell to $69 and rebounded to $70.50. Once executed, the order is filled and no longer active. D is incorrect because $71.50 is an acceptable execution price (at or above the $70 limit for a sell order), so the order does execute.

B is correct (the EXCEPT answer). This statement is FALSE. Once triggered, a stop-limit order becomes a LIMIT order (not a market order), which does NOT guarantee execution. The order will only execute at the limit price or better, and if the market moves past the limit price, the order may never fill. This execution uncertainty is the key tradeoff of using stop-limit orders instead of regular stop orders.

A is accurate: stop-limit orders require both a stop price (trigger point) and a limit price (execution boundary), distinguishing them from regular stop orders that only need a stop price. C is accurate: this describes the primary risk of stop-limit orders. In fast-moving or gapping markets, the price can move from above the stop price to below the limit price (for sell orders) without any execution occurring, leaving the investor unprotected. D is accurate: this correctly describes the fundamental tradeoff. Stop-limit orders give you control over execution price (won't sell below your limit) but sacrifice execution certainty (might not sell at all). Regular stop orders guarantee execution (become market orders) but sacrifice price control (might execute at any price).

A is correct. Only statements 1 and 2 are accurate.

Statement 1 is TRUE: The order triggers when GHI trades at or below the stop price of $48. Once the stock hits $48, the stop-limit order activates and becomes a limit order.

Statement 2 is TRUE: After triggering, the order becomes a limit order to sell at $46 or better (higher). For a sell limit order, "or better" means at the limit price or any price above it. The order will only execute at $46 or higher, providing price protection against selling below $46.

Statement 3 is FALSE: The order does NOT provide guaranteed downside protection. While it prevents selling below $46, it does not guarantee execution. If GHI gaps down from $48 to $44 (below the $46 limit), the order will never execute and the client still holds shares that have fallen below $46. Guaranteed protection would require a regular stop order, which guarantees execution but not price.

Statement 4 is FALSE: A stop-limit order is LESS likely to execute than a regular stop order in rapidly declining markets. A sell stop order at $48 becomes a market order upon trigger, guaranteeing execution (though possibly at prices below $48). The stop-limit order will only execute at $46 or better, which may not be available if the market is falling rapidly. This is the key tradeoff: stop-limit orders sacrifice execution certainty for price control.