Order Execution at Current Bid or Ask Price | CTFA Exam | ABA

Order Execution at Current Bid or Ask Price

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Question

Which order will be executed automatically at the current bid or ask price?

Answers

Explanations

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A. B. C. D.

B

The answer to the question is B. Market order. A market order is an order to buy or sell a security immediately at the current market price. Market orders are executed at the best available price in the market at the time the order is placed. This means that a market order will be executed automatically at the current bid or ask price, depending on whether it is a buy or sell order.

The other options listed in the question are limit orders, stop orders, and good-till-cancelled (GTC) orders. These types of orders are not executed automatically at the current bid or ask price.

A limit order is an order to buy or sell a security at a specific price or better. If the current market price does not reach the specified price of the limit order, the order will not be executed.

A stop order is an order to buy or sell a security when the market price reaches a specified price level, known as the stop price. Once the stop price is reached, the stop order becomes a market order and is executed at the best available price in the market.

A good-till-cancelled (GTC) order is an order to buy or sell a security that remains in effect until it is either executed or cancelled by the investor. GTC orders are typically used for longer-term trading strategies and are not executed automatically at the current bid or ask price.

In summary, a market order is the only type of order that will be executed automatically at the current bid or ask price.