DROP DOWN OPTIONS

1. (market / stop / limit)

2. (when the market opened / after 2 months / at no point in this period)

3. (the best available price / no point in this period / exactly $88)

4. (prevent him from earning large gains / limit his losses / act as a safeguard but have no real effect)

5. (at no point in this period / when the market opened)

6. (exactly $88 / no point in this period / the best available price)

7. (prevent him from earning large gains / limit his losses / act as a safeguard but have no real effect)

6. Understanding limit and stop orders Understanding How Trade Orders Work Different trade orders such as market order, limit order, stop-loss order etc. are created to give investors the liberty to manage their securities based on their expectations out of the investments Charles purchased 200 shares of an exchange traded fund (ETF) specializing in consumer staples for $90.24 per share. Charles is comfortable holding on to his shares in the face of minor fluctuations, but does not want to risk the share value falling far below his purchase price. He therefore considers order so that all 200 shares would be sold if the share price falls to $88 placing a The following graphs depict two hypothetical paths for the share value of Charles's ETF over the course of the next six months. Complete the sentences below each graph to describe what would happen if Charles placed the preceding order under each of the two circumstances. SHARE VALUE 100 96 92 88 84 80 4 1 3 5 6 MONTHS IN FUTURE ;thus the In the preceding scenario, his order would be activated and executed at over the six month period order would SHARE VALUE 100 96 92 88 84 80 1 2 3 6 MONTHS IN FUTURE ;thus the In the preceding scenario, his order would be activated and executed at over the six month period order would True or False: instead the stock price had dipped below $88 and then risen for the rest of the 6 month period, ending up at a price of $98, placing the order would have acted as a safeguard but would have had no real effect True False