Question

Imagine that you have placed a limit order to buy 100 shares of Sallisaw Tool at a price of $38.00, although the stock is currently selling for $39.92. Discuss the consequences, if any, of each of the following situations a. The stock price drops to $39.11 per share 2 months before cancellation of the limit order. b. The stock price drops to $38.00 per share. c. The minimum stock price achieved before cancellation of the limit order was $38.53. When the limit order was canceled, the stock was selling for $47.67 per share. a. If the stock price drops to $39.11 per share 2 months before cancellation of the limit order, the order b. If the stock price drops to $38.00 per share, the order be executed. (Select from the drop-down menu.) be executed. (Select from the drop-down menu.) c. The minimum stock price achieved before cancellation of the limit order was $38.53. When the limit order was canceled, the stock was selling for 4767p The orderbe executed. (Select from the drop-down menu.) hare

Answer 1

Case (a):

If the stock price drops to $39.11 per share 2 months before cancellation of the limit order, then the order will be pending to be executed. Because there is still 2 months of time to execute the order. If the price comes down to $38 level then only the order will get executed.

Case (b):

If the stock price drops to $38 then the order will be executed.

Case (c):

The minimum stock price achieved before cancellation of the limit order was $38.53. When the limit order was canceled, the stock was selling for $47.67 per share. Then the order will not be executed.