SIE practice questionmediumStop Orders
Which of the following is true about sell stop orders?
- AThey are always executed at the stop price
- BThey are entered below the current market price to limit losses on a long position✓ Correct answer
- CThey guarantee execution at the stop price
- DThey are only used in options trading
Explanation
Why B — They are entered below the current market price to limit losses on a long position
Sell stop orders are entered below the current market price and are typically used to limit losses on long positions. Once triggered, they become market orders and may execute at the next available price, not necessarily at the stop price.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Trading & Settlement questions
- Which order type should an investor use to protect a short stock position from a rising market?
- A broker-dealer receives a customer market order to buy 50 shares of a thinly traded stock. What must the broker-dealer…
- If a customer's margin account falls below the maintenance margin level, what action is the broker-dealer required to…
- A customer places a stop-limit order to sell 100 shares of DEF at $40 with a stop price of $42. If DEF falls from $44…
- A broker accepts a buy order and then trades the same security for their own account before executing the customer’s…
- A buy limit order is placed at $30. Where must the stock trade for the order to execute?
- An investor wants to buy a stock if its price falls to $50. Which order should they place?
- Under Regulation T, what is the initial margin requirement for purchasing stock on margin?