Question

You own 500 shares of Ups&Downs, Inc., stock. It is currently priced at $50. You are going on vacation, and you are realize that the company will be reporting earnings while you are away. To protect yourself against a rapid drop in the price, you place a stop-limit order to sell 500 shares at $40. It turns out the earnings report was not so good, an the stock price fell to $30 right after the announcement. It did, however, bounce back, and by the end of the day it was back to $42. What happened in your account?

Answer 1

• Since the price did fall below the stop limit price, the sell order would have got executed.
• 500 shares would have been sold from your account @ $ 40
• Share price bouncing back to $ 42 will have no effect on your account because your entire holding had already been sold.

So, on a net net basis, the sale order would have been executed and 500 shares would have been sold @ $ 40