Order Types and Trade Execution
Key flashcards on market, limit, stop, and stop-limit orders plus long/short and margin basics.
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Questions Covered in This Set
11 cards to master
What does a market order guarantee?
Execution, but not price — buys fill at the ask, sells at the bid.
What does a limit order guarantee?
Price (or better), but not execution — it may never fill.
What does 'or better' mean on a limit order?
Better for the customer: lower price on a buy, higher price on a sell.
What happens when a stop order is triggered?
The trigger (election) turns it into a market order, filling at the next available price.
Where are buy limits and sell stops placed?
Below the market (BLiSS: Buy Limits, Sell Stops = BeLoW).
Where are sell limits and buy stops placed?
Above the market.
Risk of a sell stop-limit order in a fast decline?
It triggers but may never fill, so the customer keeps falling with the stock.
Maximum gain and loss on a short sale?
Gain limited (stock can only fall to zero); loss unlimited.
Why must short sales occur in a margin account?
Unlimited loss potential; the firm must also reasonably believe it can locate shares (Reg SHO).
Reg T initial deposit for a margin stock purchase?
50% of the purchase price.
Five required pieces of information on an order?
Account, buy/sell (long or short), quantity, security, and price/timing instructions.
