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Difficulty: Very hardTypes of Orders and Order Execution Strategies

Match each order type or execution qualifier with its correct trigger condition and execution rule.

  • Buy Stop-Limit Order (45Stop/45 Stop / 47 Limit)Entered above the current market price; becomes a live limit order to buy at 47orloweroncethemarkettradesatorabove47 or lower once the market trades at or above 45.
  • Sell Stop Order ($50 Stop)Entered below the current market price; becomes an active market order to sell as soon as the stock trades at or below $50.
  • Immediate-or-Cancel (IOC) OrderRequires immediate execution of as much of the order as possible at the specified price or better, with any unexecuted portion immediately canceled.
  • Fill-or-Kill (FOK) OrderRequires immediate execution of the entire order quantity at the specified price or better; otherwise, the complete order is canceled immediately.

Answer

Buy Stop-Limit Order (45Stop/45 Stop / 47 Limit) matches with being placed above the market price and converting to a limit order at 47orloweroncetriggeredat47 or lower once triggered at 45; Sell Stop Order (50Stop)matcheswithbeingplacedbelowmarketpriceandactivatingasamarketsellorderat50 Stop) matches with being placed below market price and activating as a market sell order at 50 or lower; Immediate-or-Cancel (IOC) matches with allowing partial fills immediately while canceling unexecuted shares; Fill-or-Kill (FOK) matches with requiring an immediate complete fill or full cancellation.
Each order type matches its exact operational rule: Buy Stop-Limit orders trigger above market price and become limit orders; Sell Stop orders trigger below market price and become market orders; IOC permits partial immediate fills; FOK mandates complete immediate fill or total cancellation.

Step-by-Step Solution

1
Analyze stop order trigger mechanics relative to current market price.
Buy stop orders are set above the current market price and trigger on price increases, whereas sell stop orders are placed below the current market price and trigger on price drops.
Understanding placement rules prevents confusing buy stop orders with sell stop orders.
2
Distinguish between stop market orders and stop-limit orders post-activation.
Upon reaching or breaching the stop price, a sell stop becomes a market order executed at prevailing market prices, while a buy stop-limit becomes a limit order specifying a maximum execution price ($47).
Stop-limit orders guarantee price control but risk non-execution, whereas stop market orders guarantee execution but risk price slippage.
3
Differentiate execution qualifications for IOC vs. FOK orders.
Both IOC and FOK mandate immediate execution upon entry, but IOC permits partial execution while canceling the remainder, whereas FOK requires an all-or-none immediate execution.
The key distinction between IOC and FOK is partial fill tolerance.

Key Concept

Order Types, Trigger Conditions, and Order Execution Qualifiers
Estimated Time:2m 0s
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Topics

Types of Orders and Order Execution Strategies