SIE (Securities Industry Essentials) Practice Exam

When a stop order is triggered, what does it become?

1. Limit order

2. Market order

3. Stop-limit order

4. Call order

The correct answer is: Market order

When a stop order is triggered, it becomes a market order. This means that the order will be executed at the best available price in the market. The other options are incorrect because A) A limit order has a specific price target and will only execute at or better than that price. C) A stop-limit order has a specific price target and will only execute at that price or better, but it also has an additional limitation on the maximum price at which the order can be executed. D) A call order is a term commonly used in options trading and has no relevance to stop orders. It is important to note that the trigger price in a stop order should be carefully considered, as once it is triggered the order becomes a market order and is subject to potential price fluctuations. Placing a stop-limit order may be a more strategic choice in volatile markets.