SIE practice questioneasyLimit Orders
An investor places a limit order to buy 200 shares of ABC at $50. The current market price is $52. When will this order be executed?
- AOnly if the price drops to $50 or below✓ Correct answer
- BImmediately at $52
- COnly if the price rises to $54
- DAt the close of the trading day at whatever the price is
Explanation
Why A — Only if the price drops to $50 or below
A buy limit order sets the maximum price the investor is willing to pay. It will only execute at $50 or lower. Since the current price is $52, the order will not execute until the price drops to the limit or below. A market order would execute immediately regardless of price.
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