Series 7 Exam Question 118: Answer and Explanation

Question: 118

A client enters a buy stop order for LMN at $20. After the order is entered, trades occur as follows:

19.25, 19.75, 20.13, 19.88, 20

The order was

• A. Triggered at 19.25, executed at 19.75
• B. Triggered at 20.13, executed at 19.88
• C. Triggered at 20.13, executed at 20
• D. Triggered at 19.88, executed at 20

Correct Answer: B

Explanation:

B. This order is a buy stop order. Buy stops are SLoBS (Sell Limit and Buy Stop) orders that are triggered at or above the buy stop price, which in this case is $20. Looking at the trades, the first one at or above 20 is 20.13. Once triggered, a stop order becomes a market order for immediate execution at the next price available. So, it was triggered at 20.13 and executed at 19.88.