Chapter 04 · Section 4.1

Strategy

Imagine you hear the following:

"My strategy is to systematically place stop-limit orders to limit possible losses and to protect my unrealized profits. Suppose, I am long a put and the price is 5 1/2. I place a stop limit sell order at 5 1/4. In this way I am sure that I will under no circumstances lose more than 1/4."

Is this statement accurate?

a) no
• b) yes
  No. A stop-limit order becomes a limit order when the specified price is touched. Unlike a market order, there is no guarantee that a limit order will be executed.

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