Types of orders prevalent in the us markets, Financial Management

Assignment Help:

The following are various types of orders prevalent in the US markets:

Market Order: The most common form of order is the market order, which means the order to buy or sell at the best current market price. Market orders provide immediate liquidity to the market. The investor, who wants to buy the stock, instructs his broker to buy the stock at the lowest available price. Similarly, the seller instructs his broker to sell the stock at the highest available price; the investor is unaware of the price at which the stock will be traded.

Limit Orders: In limit orders, the investor specifies the limit at which he would like his stock to be traded. The buyer would specify the maximum limit at which the stock could be bought by the broker. Thus, the broker has the choice to buy the stock at the specified limit or lower than that. Similarly, for the seller, the maximum limit is specified, below which the stock cannot be sold. The broker has the option to sell the stock at or above the specified price limit.
Day Order: Day orders remain valid only during a specified day on which the order is placed. All market orders are taken only as day orders. The underlying assumption of this order is that the market, economic and industry conditions may change; thus investment, should be specified for a particular day only.

Week Orders: Week orders are valid for a particular trading week. For example, a trading week order placed on the BSE, is valid from Monday to Friday. With the expiry of the trading week, the order also expires.
Month Orders: Month orders are valid for a specified trading month. For example, a month order specified for June 2005 will be valid only in the month of June 2005 and will expire as the month ends.

Open Orders: Open orders are also known as ‘good till cancelled' orders. They are usually placed jointly with the limit orders. They are generally placed as monthly or quarterly orders. But there is a certain amount of risk associated with open orders as the investor may forget about the open order placed by him or market conditions may change so drastically that the order placed may not be desirable at all.

Stop Order: Stop order is a type of limit order but with a variation. A stop order to sell becomes a market order when the market price goes below spot order price. Similarly, stop order to buy becomes a market order when the market price goes above the stop order price. Stop orders limit the loss and protect investor's profit.

Stop Limit Order: Stop limit order helps to avoid the uncertainty associated with the stop orders. In case of stop limit order to sell, the investor can specify the minimum price he will accept and for stop order to buy, he specifies the maximum price that he is ready to pay for a stock.

Discretionary Orders: In this type of order, the broker has the discretion to decide whether to buy or sell the security and also its price.

 


Related Discussions:- Types of orders prevalent in the us markets

Alternative dividend policies, The managing directors of three profitable l...

The managing directors of three profitable listed companies discussed their companies' dividend policies at a business lunch. Company A ; has deliberately paid no dividends for

Interpretations of short term solvency or liquidity ratio''s, Short Term So...

Short Term Solvency or Liquidity Ratio's   CR:          The Current Ratio is calculated by current assets to current liabilities and is the index of company's financial stab

Call-put parity, Call-Put Parity P + S = C + E * [1/(1+i)] ^n     where...

Call-Put Parity P + S = C + E * [1/(1+i)] ^n     where:      P = the market price of the put    S = the market price of the stock    C = the market price of the call

Explain the incremental cash flows of a capital project, Explain what is me...

Explain what is meant by the incremental cash flows of a capital project. Incremental cash flows are defined by the change in total firm cash inflows and cash outflows which ca

Working Capital Management, The management of Nelson plc wish to estimate t...

The management of Nelson plc wish to estimate their firm’s equity beta. Nelson has had a stock market quotation for only two months and the financial management feels that it would

Criticism of walter’s model, (i) No External Financing: - Walter' model pre...

(i) No External Financing: - Walter' model presume that the firm's investment are financed exclusively by retained earnings and no external financing is used. If it was therefore t

Discuss the objectives of financial statements, Question: The Statement...

Question: The Statement of Principles for Financial Reporting sets out the principles that should underlie the preparation and presentation of general-purpose financial stateme

Annual effective rate, You have recently won the UniSA "log tossing" compet...

You have recently won the UniSA "log tossing" competition. The prize of $200 is supposed to be used to buy a 50-year subscription to "Log News" This appears to represent a consid

How are financial trades made on an organized exchange, How are financial t...

How are financial trades made on an organized exchange? Every exchange-listed security is traded at a precise location on the trading floor called the post. The trading is mana

Historical inflation and stock value experience, Historical Inflation and S...

Historical Inflation and Stock Value Experience The experimental evidence denies the status of stocks as a good hedge against inflation. A study conducted by Ibbotson and Brins

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd