On April 5, 2019, shares of the sportswear manufacturer Adidas AG closed at 227.55 on the Frankfurt

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On April 5, 2019, shares of the sportswear manufacturer Adidas AG closed at €227.55 on the Frankfurt Stock Exchange. That night the company announced better-thanexpected earnings results, and the next morning trading in the stock opened at €235 and then quickly rose to €250 before ending the day at €240.
a. Suppose that near the end of the day on April 5 an investor placed a limit order to buy 100 shares of Adidas for €227. What happened in the investor’s account the next day?
b. Suppose an investor heard about Adidas’ good earnings on an evening financial news program on April 5. Thinking that Adidas was a good buy on that day’s €227.55 closing price, the investor submitted a market order to buy 50 shares of Adidas after the exchange was closed, so the order is valid for the next day. What was the result?
c. Another investor, who already owned 300 shares of Adidas, also heard the news on the evening of April 5. This investor expected the Adidas’ stock price to increase the next day, so he submitted a limit order to sell 300 shares at €240. What was the result?
d. A day trader following Adidas placed a market order to buy 1,000 shares at 10.30 a.m. on April 6, at which time Adidas was trading for €237. The trader watched the price rise to €250 and then, to protect the morning’s gains, submitted a stop-limit order to sell at €245. What happened?

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Fundamentals Of Investing

ISBN: 9780135175217

14th Edition

Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk

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