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Question

Difficulty: MediumTypes of Orders and Order Execution Strategies

Match each order type or execution qualifier on the left with its correct execution rule or trigger condition on the right.

  • Buy Stop OrderPlaced above the market price; becomes a market order once the stock trades at or through the trigger price.
  • Sell Limit OrderPlaced above the market price; executed only at the specified limit price or higher.
  • Immediate-or-Cancel (IOC)Must be executed immediately in whole or in part, with any unexecuted portion cancelled.
  • Fill-or-Kill (FOK)Must be executed immediately in its entirety, or the entire order is cancelled.

Answer

Buy Stop Order matches 'Placed above the market price; becomes a market order once the stock trades at or through the trigger price.'; Sell Limit Order matches 'Placed above the market price; executed only at the specified limit price or higher.'; Immediate-or-Cancel (IOC) matches 'Must be executed immediately in whole or in part, with any unexecuted portion cancelled.'; Fill-or-Kill (FOK) matches 'Must be executed immediately in its entirety, or the entire order is cancelled.'
Each order type and execution instruction accurately reflects FINRA market rules for price triggers, execution guarantees, and partial fill permissions.

Step-by-Step Solution

1
Differentiate price trigger mechanics between Buy Stop and Sell Limit orders.
Identify that a Buy Stop converts into a market order once triggered at or above the stop price, while a Sell Limit requires execution at the limit price or higher.
Understands price placement and execution rules for orders entered above current market price.
2
Differentiate partial execution allowances between Immediate-or-Cancel (IOC) and Fill-or-Kill (FOK) qualifiers.
Recognize that FOK requires a complete immediate fill with no partial execution permitted, whereas IOC permits partial fills immediately while cancelling any unfilled remainder.
Distinguishes immediate execution qualifiers based on partial fill capability.

Key Concept

Types of Orders and Order Execution Strategies
Estimated Time:1m 30s
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Topics

Types of Orders and Order Execution Strategies