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# P1.T3.200. Market and limit orders

#### David Harper CFA FRM

##### David Harper CFA FRM
Staff member
Subscriber
Questions:

200.1. You want to purchase 5,000 shares of a stock with the following real-time quote: bid $29.94 - ask$30.08 with bid-ask sizes of 3,000 shares (bid) and 10,000 shares (ask). The previous price close was $29.99. Which of the following is the most likely execution of your market buy order? a. You pay$29.94 for all 5,000 shares
b. You pay $29.99 for all 5,000 shares c. You pay$29.94 for 3,000 shares but you pay $30.08 for the remaining 2,000 shares d. You pay$30.08 for all 5,000 shares

200.2. You own 10,000 shares of a stock that is currently quoted with a bid price of $19.95 and an ask (offer) price of$20.03, with bid-ask sizes much larger than your holdings. You enter a limit sell order at $20.00. Which of the following executions of your LIMIT order is most likely? a. Your sale will be immediately executed at$20.00
b. Your sale will be immediately executed at $19.95 c. Your sale will be immediately executed at$20.03
d. Your sale may not be executed (or a partial fill may be executed)

200.3. Joe Smith owns 100,000 shares of ACME stock which currently trades at $50.00. He enters a stop-limit order to sell at$48.00 with a limit of $47.00. Which of the following is most likely? a. The order is not logical, the stop should be above the current$50.00
b. Conditional on the bid or ask falling to $48, the sell order is filled only if the sale can be executed at$47 or higher, but may not be filled
c. Conditional on the bid or ask falling to $48, the sell order will be immediately executed but the price will not be guaranteed d. The sell order immediately begins execution at$48 but ceases if the bid drops below $47 such that a partial fill is possible. Answers: #### Angelo86na ##### New Member 200.1 answer c (or the second b) 200.2 for esclusion answer d 200.3 answer b #### David Harper CFA FRM ##### David Harper CFA FRM Staff member Subscriber @nychets & @Angelo86na: I notice you both answered (C) for 200.1. I hope my question is well stated but please note: the bid/ask is$29.94 (size 3,000) - $30.08 (size 10,000). As a buyer, the best offer by market sellers is$30.08, so I can likely get my buy order filled at \$30.08 or higher (most likely higher if i exceed the size).

Since this market buy order is within the size, my answer is (D). Please let me know if you think the question is imprecise?

Thanks!

#### Angelo86na

##### New Member
Sorry David, is my fault. Your question is precise, I wore the clothes of the dealer answering the question.

#### nychets

##### New Member
Doh! Question is fine, I can't imagine what I did there. I trade all day long, thank heaven I don't err like that every day, lol. I answered too quickly and carelessly. It's an excellent reminder for me to read the easy questions carefully on the Level II exam in June 2013!

#### David Harper CFA FRM

##### David Harper CFA FRM
Staff member
Subscriber
@nychets - thank you nychets ... phew ... I don't trade quite enough to be facile with the bid/ask so I'm glad it looks okay, thanks,

#### Niravparikh281

##### New Member
Hi..

Why not D over B for 3rd question. Investors can input any bid or ask they want but a trade must get executed at 48 for the stop-limit order to kick in. Not sure what I am missing