Chapter 04 · Section 4.1
Stop Limit Orders
Which of the following stop limit orders cannot be executed at 6 1/2?
a) Buy 3 July Sperry 45 calls 6 1/4 stop limit
b) Buy 3 July Sperry 45 calls 6 1/4 stop limit 6 1/2
If the price has become "as bad as or worse than" the trigger price" ,the stop limit order becomes a limit order.
A buy-stop order is triggered when the price is as high as specified or higher. A sell-stop order is triggered when the price
is as low as specified or lower.
The first price in (b) (6 1/4) is the trigger price, the second price (6 1/2) is the limit price.
In (a) both the trigger price and the limit price are 6 1/4.
A limit order specifies a price at which an option may be bought or sold.
If the price has become "as bad as or worse than" the trigger price, the stop limit order becomes a limit order.