SIE practice questionmediumOrder Types
Which statement about stop orders is correct?
- AThey guarantee a specific execution price.
- BThey are designed to limit losses or protect profits.✓ Correct answer
- CThey only execute during the opening auction.
- DThey can only be placed for odd lots.
Explanation
Why B — They are designed to limit losses or protect profits.
Stop orders are often used to limit losses or protect gains. They become market orders when triggered and don't guarantee execution at a specific price or occur only at opening. They apply to any order size.
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