Which of the following is NOT part of the Secondary Market?
A. First Market
B. Primary Market
C. Second Market
D. Third Market
The best answer is B. The Primary Market is the sale of new issues for the first time; no trading takes place in the Primary Market. The First Market is trading of exchange listed securities on that exchange floor. The Second Market is trading of securiti
The Secondary Market is divided into the:
I First Market
II Second Market
III Third Market
IV Fourth Market
A. I and II only
B. III and IV only
C. I, II, III
D. I, II, III, IV
The best answer is D. The Secondary Market is categorized into 4 sub-markets: the First; Second; Third; and Fourth Markets. The First Market is trading of exchange listed securities on that exchange. The Second Market is trading of securities that are not
The First Market includes trading in:
A. unlisted issues
B. new issues
C. NYSE issues
D. OTC issues
The best answer is C. The First Market is trading of listed stocks on an organized stock exchange - like the NYSE, AMEX (now renamed the "NYSE-MKT") or NASDAQ exchanges. Exchanges have listing standards for the companies that trade there and accessible or
Which of the following first markets does NOT trade futures contracts?
A. NYMEX
B. NYSE
C. CBOT
D. CME
B
Which statements are TRUE?
I Quotes for NYSE listed issues, regardless of the market venue where the quote originates, are found on CQS
II Quotes for NYSE listed issues, regardless of the market venue where the quote originates, are found on the UQDF
III
The best answer is B. CQS (Consolidated Quotations Service) aggregates and displays quotes for all market makers in exchange listed issues - both NYSE and NYSE-MKT (AMEX) listed. These market makers are exchange Specialists/DMMs and Third Market Makers (O
Quotes from all market centers in NYSE listed securities are found on (the):
A. CQS (Consolidated Quotations Service)
B. UQDF (UTP Quote Data Feed)
C. ADF (Alternate Display Facility)
D. Pink Sheets
The best answer is A. CQS (Consolidated Quotations Service) aggregates and displays quotes for all market makers in exchange listed issues - both NYSE and NYSE-MKT (AMEX) listed. These market makers are exchange Specialists (DMMs) and Third Market Makers
Trades of NYSE-MKT (AMEX) listed securities that take place in all markets are consolidated and reported through the:
A. Network A Tape
B. Network B Tape
C. Network C Tape
D. Network D Tape
The best answer is B. The Network B Tape reports trades of NYSE-MKT (AMEX)-listed issues, regardless of the market venue where the trade took place. The Network A Tape reports trades of NYSE-listed issues, regardless of the market venue where the trade to
Which statements are TRUE?
I Trades of NYSE listed issues, regardless of the market venue where the trade took place, are reported via the Network A Tape
II Trades of NYSE listed issues, regardless of the market venue where the trade took place, are repor
The best answer is B. Reports of trades of NASDAQ issues are made through the Network C Tape, regardless of the market venue where the trade took place. The Network A Tape reports trades of NYSE-listed issues, regardless of the market venue where the trad
The Second Market is the:
A. trading of OTCBB stocks
B. issuance of listed stocks
C. trading of listed stocks on the floor of an exchange
D. issuance of listed and unlisted stocks
The best answer is A. The Second Market is over-the-counter trading of securities that are not listed on a stock exchange. For equities, the Second Market is the OTCBB (Over-The-Counter Bulletin Board) and the Pink OTC Markets. The First Market is trading
The trading of listed securities over-the-counter occurs in the:
A. First Market
B. Second Market
C. Third Market
D. Primary Market
The best answer is C. The trading markets are:
First Market: Trading of exchange listed securities on stock exchanges
Second Market: Trading of unlisted securities over-the-counter
Third Market: Trading of exchange listed securities over-the-counter
The P
Market makers in the Third Market trade:
A. listed stocks
B. unlisted stocks
C. dual listed stocks
D. foreign stocks of companies located in Third World countries
The best answer is A. The "Third Market" is OTC trading of exchange listed securities. These Third Market Makers (firms such as Weeden and Co. and Jefferies and Co.) now account for about 40% of trades in NYSE listed issues. Thus, these are competitors fo
Which statements are TRUE about ECNs?
I ECNs only trade listed stocks
II ECNs trade listed and OTC stocks
III ECN trades are not reported to the tape
IV ECN trades occur away from exchange trading floors
A. I and III
B. I and IV
C. II and III
D. II and IV
The best answer is B. ECNs (Electronic Communications Networks) only trade listed stocks (NYSE, NYSE-MKT (AMEX) and NASDAQ). They do this as an institutional matching service, getting a small fee for each match. These trades occur OTC in the "Fourth Marke
The Fourth Market is trading of:
A. listed securities on an exchange floor
B. Pink Sheet securities "over-the-counter"
C. listed securities "over-the-counter"
D. securities directly between institutions
The best answer is D. The Fourth Market is direct trading of securities between institutions on ECNs (Electronic Communications Networks) such as Instinet or Archipelago. The systems bypass brokerage firms, and therefore brokerage commissions. Instead, th
Which of the following is NOT an ECN?
A. INSTINET
B. ISLAND
C. ARCHIPELAGO
D. PENINSULA
The best answer is D. ECNs - Electronic Communications Networks - only accept orders for actively traded securities - that is, NYSE listed and NASDAQ stocks. Essentially they are electronic matching services, matching customer buy and sell orders for a ve
The SEC regulation that requires large ECNs to publicly display their quotes so that they can be traded against electronically is:
A. Regulation NMS
B. Regulation ATS
C. Regulation SHO
D. Regulation M
The best answer is B. Under Regulation ATS, any ECN (Electronic Communications Network) or ATS (Alternative Trading System) must register with FINRA as a broker/dealer (therefore it comes under some market regulation). Once an ECN is big enough (5% of the
Which of the following securities are traded in the secondary market?
I Preferred Stocks
II American Depositary Receipts
III Mutual Funds
IV Municipal Bonds
A. I and II only
B. III and IV only
C. I, II and IV
D. I, II, III, IV
The best answer is C. Equities - common stock, preferred stock, and American Depositary Receipts trade on exchanges and are traded "over-the-counter." Municipal and U.S. Government bonds are traded "over-the-counter." There is no trading of mutual fund sh
Which of the following securities are traded in the secondary market?
I U.S. Government bonds
II U.S. Government savings bonds
III Municipal bonds
IV Municipal bond funds
A. I and II only
B. III and IV only
C. I and III only
D. I, II, III, IV
The best answer is C. U.S. Government bonds and municipal bonds are traded "over-the-counter" (there is no trading of these on exchange floors). There is no trading of U.S. Government savings bonds because these are non-negotiable. There is no trading of
All of the following securities are traded in the secondary market EXCEPT:
A. Mutual funds
B. NYSE listed stocks
C. NASDAQ listed stocks
D. OTC stocks
The best answer is A. Open end funds (mutual funds) are redeemable with the sponsor - they do not trade. All stocks are traded in the secondary market, with much higher trading volumes for NYSE and NASDAQ listed issues; and much lower trading volumes for
In an inefficient market:
I dealer spreads are wide
II dealer spreads are narrow
III trading volume is high
IV trading volume is low
A. I and III
B. I and IV
C. II and III
D. II and IV
Answer is B. An inefficient market is the opposite of an efficient one. An "inefficient" market is where there is a low trading volume - meaning there is high liquidity risk. With such light trading volume, dealer spreads will widen.
The Third Market is a(n):
A. auction market
B. negotiated market
C. unregulated market
D. primary market
The best answer is B. The Third Market is trading of listed securities "over-the-counter." This is a negotiated market. Third Market Makers are firms like Jefferies and Co. or Weeden and Co. They do most of their trading when the NYSE is closed and to tra
The trading of securities on regional stock exchanges is most similar to trading, as it takes place, on the:
A. NYSE
B. CBOE
C. NASDAQ
D. MSRB
The best answer is A. The regional stock exchanges use a Specialist (Designated Market Maker) system for trading similar to the NYSE. NASDAQ uses a system of competing market makers, instead of a single Specialist/DMM in each security. The CBOE uses a sys
A dual listed stock is one which trades in:
A. the second market
B. the secondary market
C. two different U.S. market venues
D. the primary and secondary markets
The best answer is C. A dual listed stock is one which trades in more than one marketplace (market "venues") - for example, a young West Coast company might have listed on the Pacific exchange when it was still small; and then listed on the NYSE when the
Stocks that are listed on the New York Stock Exchange can also typically be listed and traded on:
A. the American Stock Exchange (NYSE-MKT)
B. the Chicago (Midwest) Stock Exchange
C. the Chicago Board Options Exchange
D. Instinet
The best answer is B.
Stocks that are listed on the NYSE are typically not listed on the AMEX or NASDAQ. Each one of these is a "national" stock exchange, trading companies where there is a "national interest" in trading those stocks. In the past, the AME
Stocks that are listed on the New York Stock Exchange can also be typically listed and traded on all of the following exchanges EXCEPT:
A. American Stock Exchange
B. Chicago (Midwest) Stock Exchange
C. Boston Exchange
D. Pacific Exchange
The best answer is A. Stocks that are listed on the NYSE are typically NOT listed on the AMEX or NASDAQ. Each one of these is a "national" stock exchange, trading companies where there is a "national interest" in trading those stocks. A dual listed stock
The individuals who make a secondary market in corporate bonds include which of the following?
I Market Makers
II Underwriters
III Traders
IV Dealers
A. I and II
B. II and IV
C. I, III, IV
D. I, II, III, IV
The best answer is C. The secondary market is the trading of issues outstanding in the market. The individuals making the secondary market are the market makers (also known as dealers) and traders. Underwriters take new issues public in the primary market
The individuals who make a secondary market in corporate bonds include all of the following EXCEPT:
A. market makers
B. dealers
C. traders
D. registered representatives
The best answer is D. The secondary market is the trading of issues outstanding in the market. The individuals making the secondary market are the market makers (also known as dealers) and traders. Both market makers (dealers) and traders deal with the pu
Retail member firms that route orders to market makers in return for compensation:
I are engaging in a prohibited practice under SEC rules
II permitted to do so, subject to best execution requirements
III must disclose the practice on customer confirmatio
The best answer is C. If a retail member firm chooses a market maker to execute its orders in return for compensation from that market maker, then the retail firm is earning so-called "payment for order flow." The SEC permits this practice, subject to the
Retail member firms that route orders to market makers in return for compensation earn:
A. mark-ups
B. mark-downs
C. commissions
D. payments for order flow
The best answer is D. If a retail member firm chooses a market maker to execute its orders in return for compensation from that market maker, then the retail firm is earning so-called "payment for order flow." The SEC permits this practice, subject to the
A market maker that compensates a retail member firm for sending its customer orders to that market maker is:
I paying for order flow
II interpositioning
III engaging in a prohibited practice under SEC rules
IV permitted to do so, subject to best executio
The best answer is B. If a retail member firm chooses a market maker to execute its orders in return for compensation from that market maker, then the retail firm is earning so-called "payment for order flow." The SEC permits this practice, subject to the
An order for a New York Stock Exchange listed issue is routed by the member firm to a Third Market Maker rather than to the exchange floor. This practice is:
A. prohibited
B. permitted only if the customer consents
C. permitted only if an attempt to fill
The best answer is D. SEC rules require that execution must occur at the "best market." If a stock is traded in multiple markets, then the order must be routed by the member firm to the market that is posting the best quote.
Customers who trade NYSE listed securities during extended trading hours are:
I subject to a higher degree of price volatility than during regular trading hours
II subject to a lower degree of price volatility than during regular trading hours
III always
The best answer is B. The "after hours" trading sessions have much lower investor participation, so trading volumes are very small. Because of the lack of order flow, the market is less liquid; and as a result, few dealers participate in the market. Thus,
What regulation requires market centers to accept automated executions that do not discriminate against any class of users?
A. OATS
B. TRF
C. NMS
D. TRACE
The best answer is C. Rule 610 of Regulation NMS requires all market centers to electronically link and provide automated execution within 1 second for orders that are executable. It also mandates that market centers cannot discriminate against customers
The trade-through rule of Regulation NMS applies to:
I NYSE listed issues
II NYSE-MKT (AMEX) listed issues
III NASDAQ listed issues
A. I only
B. I and II
C. II and III
D. I, II, III
The best answer is D.
The "NMS" securities under Regulation NMS (National Market System) are NYSE, NYSE-MKT (AMEX) and NASDAQ listed issues. The trade-through rule requires that if an executable order routed to these markets cannot be filled at the best p
Rule 605 of Regulation NMS requires:
A. each market center to prepare monthly electronic reports about its quality of executions and effective spreads
B. each broker-dealer to prepare quarterly reports on its routing of non-directed orders, including the
The best answer is A.
Rule 605 of Regulation NMS ("National Market System") requires market centers to make monthly electronic reports about the quality of execution in each stock traded, including how market orders of various sizes are executed relative
Under Rule 606 of Regulation NMS, if requested by a customer, broker-dealers must disclose the market venues to which that customer's orders were directed during the preceding:
A. 6 months
B. 9 months
C. 12 months
D. 18 months
The best answer is A. Rule 606 of Regulation NMS covers reports that broker-dealers must prepare on their order-routing procedures.
Upon customer request, a member firm must disclose the markets to which the customer's orders were routed during the past 6
An NMS stock is current quoted at $16.10 Bid - $16.30 Ask. A customer wishes to place an order to buy 1,000 shares of the stock at $16.111. The registered representative should:
A. refuse to accept the order
B. route the order to an ATS
C. route the order
The best answer is A. Rule 612 of Regulation NMS does not allow sub-penny orders to be entered for NMS stocks. The order must be refused under SEC rules (or the representative can tell the customer to enter it as $16.11, but this is not given as a choice)
If a customer directs that a marketable order be sent to a specific trading venue, then the trade must be:
A. rejected
B. sent to the NYSE for execution
C. sent to the market specified by the client
D. sent to the market with the largest display size
The best answer is C. If the customer directs that the trade be sent to a specific trading venue, follow the customer's instructions. When the trading venue gets the order, it must either fill the order at the best price available in all markets; or it mu
A customer places a marketable order to buy 1,000 shares of ABCD stock, an NYSE listed company. The customer directs that the trade be routed to the BATS exchange for execution and not be sent to the NYSE. Which statement is TRUE about this?
A. The custom
The best answer is A. If the customer directs that the trade be sent to a different trading venue, follow the customer's instructions. When BATS gets the order, it must either fill the order at the best price available in all markets; or it must re-route
All of the following information must be on an order ticket before it can be entered EXCEPT:
A. execution price if the order is not a market order
B. amount of accrued interest to be paid
C. size of the transaction
D. customer account name and/or number
The best answer is B. The amount of accrued interest is calculated after a bond trade is executed - it is not on the order ticket that is used to enter the order. The ticket must include the size of the trade, desired execution price, and customer identif
Which statement is TRUE?
A. AON orders can be executed in part or in full
B. FOK orders can be executed in part or in full
C. AON orders are canceled if the entire order is not executed
D. FOK orders are canceled if the entire order is not executed
The best answer is D. A "fill or kill" order is to be executed in full or the order is canceled. An "all or none" order is to be executed in full, but if trader can't fill the order, he is free to attempt execution at a later time. These orders cannot be
A market or limited price order which is to be executed in its entirety or not at all, but is not treated as canceled if not executed as soon as it is represented to the Trading Crowd, is a(n):
A. All or None
B. Fill or Kill
C. Immediate or Cancel
D. Not
The best answer is A. An "all or none" order requires the trader to execute the order in full on the floor of the exchange, however, if execution cannot be performed, the trader may attempt to fill the order at a later time. This contrasts to a "fill or k
A market or limited price order which is to be executed in its entirety as soon as it is represented in the Trading Crowd, and, if not executed, is canceled, is a(n):
A. All or None
B. Fill or Kill
C. Immediate or Cancel
D. Not Held
The best answer is B. An "all or none" order requires the trader to execute the order in full on the floor of the exchange, however, if execution cannot be performed, the trader may attempt to fill the order at a later time. This contrasts to a "fill or k
A customer enters an order to buy 500 shares of ABC stock at $38.00 IOC. 200 shares are filled at $38.00; 200 shares are filled at $37.50; and 100 shares are not filled. Which statements are TRUE?
I The customer must accept the partial execution
II The cu
The best answer is B. An immediate or cancel order requires the trader to execute the order in part or in full in one attempt, with the unexecuted portion of the order (if any) canceled. No additional execution attempts are allowed. The customer must acce
A customer places an order to either buy 2,000 shares of ABC stock at 50 GTC; or to buy 2,000 shares of ABC stock at 70 Stop GTC when the market price of ABC is $52. The order is entered on the firm's internal order book, and 2,000 shares are filled at $5
The best answer is D. This is known as an "either / or" order. If one side of the order is filled, that cancels the other side. If one side of the order is partially filled, the other side is reduced by a similar amount. This customer wishes to either Buy
In an "either / or" order, which of the following statements are TRUE?
I If one side of the order is completely filled, the other side of the order is canceled
II If one side of the order is completely filled, the other side remains unchanged
III If one s
The best answer is A. In an "either / or" order, if one side of the order is filled, that cancels the other side. If one side of the order is partially filled, the other side is reduced by a similar amount.
A Day order placed "market - at the open":
I must be executed that day
II may be executed at the opening on the next day
III will be executed at the opening market price or canceled
IV will be executed as close to the opening price as possible
The best answer is A. An order placed "market - at the open" receives an execution at the opening price that trading day, or is canceled.
When must an "at the opening" and an "at the closing" order be filled?
I An "at the opening" order is to be filled at the opening price
II An "at the opening" order is to be filled as close to the opening time as possible
III An "at the close" order is to
...
A Day order placed "market - at the close":
I must be executed that day
II may be executed at the opening on the next day
III will be executed at the closing market price or canceled
IV will be executed as close to the closing price as possible
A. I and I
The best answer is A. An order placed "market - at the close" receives an execution at the closing price that trading day, or is canceled.
All of the following customers are considered to be long 100 shares of ABC stock EXCEPT a customer who:
A. has bought 100 ABC shares in a regular way trade that has not yet settled
B. owns 1 ABC call contract
C. owns two ABC convertible bonds, convertible
The best answer is B. A customer is considered to be long stock once the stock has been purchased. The transaction does not have to settle for the customer to be considered to be long. A customer is considered to be long if he owns options or warrants and
An order ticket to sell 100 shares of ABC short means that the seller will:
A. deliver shares that are owned on settlement date
B. deliver shares that are borrowed on settlement date
C. not deliver shares on settlement date, but will deliver a due bill in
The best answer is B. A short sale is a sale of borrowed shares. The customer is speculating that the price of the security will drop, and borrows the shares from a broker to sell. These borrowed shares are delivered to the buyer on settlement date. The s
A transaction is mistakenly placed in John Jones' cash account when it should have been recorded in John Jones' margin account. To correct this:
I the registered representative must create a cancel/rebill record detailing the reasons for the designation c
The best answer is A. FINRA requires that anytime there is a change of account name or designation relating to an executed order, a written record must be made of the change. This is called a "Cancel-Rebill" record. A branch manager or compliance officer
Prior to the opening of the options exchange, an investor wishes to place an order to buy an option contract at a premium that is lower than the previous day's close. The order type to be placed is a(n):
A. At the open order
B. Limit order
C. Stop order
D
he best answer is B. The orders that are placed lower than the current market are "OBLOSS" - Open Buy Limit orders and Open Sell Stop orders. Thus, to buy an option at a premium that is lower than the closing price, an open buy limit order would be placed
Buy limit orders are:
I placed below the current market value
II placed above the current market value
III executed if the market falls
IV executed if the market rises
A. I and III
B. I and IV
C. II and III
D. II and IV
The best answer is A. Buy limit orders are placed below the current market value and are executed if the market falls to that price or lower.
Prior to the opening of the options exchange, an investor wishes to place an order to sell an option contract at a premium that is higher than the previous day's close. The order type to be placed is a(n):
A. At the open order
B. Limit order
C. Stop order
The best answer is B. The orders that are placed higher than the current market are "OSLOBS" - Open Sell Limits and Open Buy Stops. Thus, to sell at a price higher than the current market, an open sell limit order would be placed.
Conversely, the orders t
Sell limit orders:
I used to sell securities at prices that are lower than the current market price
II used to sell securities at prices that are higher than the current market
III guarantee a specific execution price or better
IV do not guarantee a speci
The best answer is C. Sell limit orders are used to sell securities at prices that are higher than the current market. They may only be filled at the limit price or higher - so they do guarantee a specific execution price or better.
Which of the following statements are TRUE about stop orders?
I Buy stop orders can accelerate price advances in bull markets
II Sell stop orders can accelerate price declines in bear markets
III Buy stop orders limit losses on short stock positions
IV Se
The best answer is D. Buy stop orders are placed above the market and are triggered as the market rises. If there is a large pool of buy stop orders at a certain price, when the market hits that level, they are triggered and become market orders to buy -
A customer places an order to "Sell 100 ABC @ 90 Stop." The customer wishes to sell the stock at:
A. $90 per share
B. the market price, if the market falls to $90 per share or lower
C. the market price, if the market rises to $90 per share or higher
D. a
The best answer is B. This order is a Sell Stop order, which is placed below the current market value. If the market price falls to $90, the order is elected and becomes a market order to sell. Once elected, the order is executed at the next available pri
A customer places an order to sell 100 XYZ at 38 Stop. This means that the order:
A. can only be filled at 38 exactly
B. will be filled at 38 or better only after a trading halt
C. is elected at 38 or higher and executed at the next available price
D. is
The best answer is D. This is a sell stop order. OBLOSS orders (Open Buy Limits and Open Sell Stops) are placed below the current market. Sell stop orders are elected when the market falls to the stop price or lower. Once the order is elected, it becomes
Which statements are TRUE regarding sell stop orders?
I Sell stop orders will be elected at the stop price or lower
II Sell stop orders will be elected at the stop price or higher
III Once elected, sell stop orders will be executed at the stop price speci
The best answer is B. Stop orders are placed "away" from the current market - sell stop orders are placed below the current market price (and elected at or below the stop price) while buy stop orders are placed above the current market price (and elected
A customer places an order to "Buy 100 ABC @ 90 Stop." The customer wishes to buy the stock at:
A. $90 per share
B. the market price, if the market falls to $90 per share or lower
C. the market price, if the market rises to $90 per share or higher
D. a pr
The best answer is C. This order is a Buy Stop order, which is placed above the current market value. If the market price rises to $90, the order is elected and becomes a market order to buy. Once elected, the order is executed at the next available price
A buy stop order is executed:
I in falling markets
II in rising markets
III at the price specified
IV at the market price
A. I and III
B . I and IV
C. II and III
D. II and IV
The best answer is D. A buy stop order is an order to buy at a price that is higher than the current market. It is used to stop a loss on a short stock position, by buying in as the market rises. The "stop" price is a trigger, that, once hit, "elects" the
Buy stop orders are:
I placed above the current market
II placed below the current market
III triggered as the market rises
IV triggered as the market falls
A. I and III
B. I and IV
C. II and III
D. II and IV
The best answer is A. Buy stop orders are placed above the market and are triggered as the market rises. If there is a large pool of buy stop orders at a certain price, when the market hits that level, they are triggered and become market orders to buy -
The order to "Sell 100 ABC @ 90 Stop Limit" is:
I elected at 90 or below
II elected at 90 or above
III executed after the order is elected at the next available price
IV executed after the order is elected at a price that is at or above 90
A. I and III
B.
The best answer is B. This order is a sell stop limit order. Sell stop limit orders can first be looked at as a stop order, placed below the current market. If the market drops to 90 or lower, the order is elected. However, instead of becoming a market or
A customer places the following instructions with his registered representative:
"Buy 100 shares of ABC if the market rises to $45, but don't buy the stock for more than $50."
What is the appropriate order to be placed?
A. Buy ABC @ 45 Stop 50 Limit
B. Bu
The best answer is A. This customer wishes to buy the stock if the market rises to $45 per share. The only order that allows the purchase of stock at a price above the current market is a buy stop order. A buy limit order cannot be used because this type
Orders that are placed lower than the current market are:
I buy limits
II buy stops
III sell limits
IV sell stops
A. I and III
B. I and IV
C. II and III
D. II and IV
The best answer is B. The orders that are placed lower than the current market are "OBLOSS" - Open Buy Limit orders and Open Sell Stop orders. Buy limit orders allow the purchase of a security at a price that is cheaper than the current market; sell stop
The orders that are higher in price than the current market are:
I Open Buy Limits
II Open Buy Stops
III Open Sell Limits
IV Open Sell Stops
A. I and III
B. I and IV
C. II and III
D. II and IV
The best answer is C. Sell limits and buy stops are the orders that are placed above the current market and are elected as the market rises. Remember OSLOBS - Open Sell Limits and Open Buy Stops as the orders placed above the current market.
A technical analyst has been charting the price movements of ABC stock. The stock has been fluctuating in price between $58 and $63 per share for the past 3 months. If the analyst expects a breakout through the support level, which order should be placed?
The best answer is D. If a stock moves through a support level, it is breaking out to the downside. In this example, the support level is at $58. If the stock moves through this price, it is expected that it will move sharply downward. To sell below the c
A technical analyst has been charting the price movements of ABC stock. The stock has been fluctuating in price between $49 and $54 per share for the past 3 months. If the analyst expects a breakout through the resistance level, which order should be plac
The best answer is D. If a stock moves through a resistance level, it is breaking out to the upside. In this example, the resistance level is at $54. If the stock moves through this price, it is expected that it will move sharply upward. To buy above the
Which orders guarantee execution but not price?
I Buy Limits
II Buy Stops
III Sell Limits
IV Sell Stops
A. I and II
B. III and IV
C. I and III
D. II and IV
The best answer is D. If a "Stop" order is elected, it becomes a market order to be filled at the first opportunity. Thus, the actual price at which the order is executed is not known. On the other hand, a "Limit" order specifies that the execution must c
An investor has bought 500 shares of a volatile growth stock and wishes to limit downside loss. Which strategies are appropriate?
I Place a buy stop order
II Place a sell stop order
III Buy 5 put contracts
IV Sell 5 put contracts
A. I and IV
B. II and III
The best answer is B. To limit loss on a long stock position, the investor wants to sell if the market drops. To sell in a falling market, the appropriate order is a sell stop order. Another strategy that would work is the purchase of a put contract, givi