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.
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