SIE practice questionmediumOrder Types
Which order type should an investor use to protect a short stock position from a rising market?
- ABuy stop order✓ Correct answer
- BSell limit order
- CBuy limit order
- DSell stop order
Explanation
Why A — Buy stop order
A buy stop order is placed above the current market price and is designed to limit losses on a short position if the price rises. Sell limit and buy limit are not used to protect shorts in rising markets; a sell stop would be used for long positions.
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