SIE practice questionhardOrder Types
If a stop order to sell is triggered in a rapidly falling market, what execution risk does the investor face?
- ANo execution at all
- BReceiving a fill at a much lower price than the stop price✓ Correct answer
- CGuaranteed execution at the stop price
- DImmediate execution at the limit price
Explanation
Why B — Receiving a fill at a much lower price than the stop price
Sell stop orders become market orders when triggered and may fill at much lower prices in a fast market. There is no price guarantee; stop-limit orders are used when price is the priority.
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