Chapter 04 · Section 4.1

Stop Orders -Buy

Suppose you have written 3 CBOE BankAm June 15 calls at 1 1/2 You place the following stop order: Buy 3 CBOE BankAm June 15 calls stop-loss 3 1/2 GTC

Three weeks pass and Bank of America June 15 calls now trade at 3 1/8. Should the floor broker buy?

a) no
• b) yes
  No. The buy-stop price specified (3 1/2) has not been traded through if the price has risen to only 3 1/8. The broker must not buy on the basis of the instructions of this order.

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