Chapter 04 · Section 4.1
Stop Orders- Call
Take a second look at that stop order:
Buy 3 CBOE BankAm June 15 calls stop-loss 3 1/2
The floor broker should not execute the order as long as the market price of the call option remains below 3 1/2 because:
b) you want a lower price than 3 1/2.
No. It is true that you always want to buy at the lowest price possible. But your motive for a stop-loss order is to prevent further losses that you would incur, if the price continued to increase.
c) you want a higher price than 3 1/2.
d) the price is not yet as bad as 3 1/2.
a) you want a better price than 3 1/2.
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