CH 9 Equity Securities Equity Transactions

Question 1

Margin risks of being a long position(3)

Answer 1

1. Margin increases market value
2. Loan and interest must be repaid
3. Margin calls must be paid without delay

Question 2

risks of short selling(8)

Answer 2

1. Borrowing sales
2. adequate margin
3. buy-in requirements
4. insufficient information
5. price action
6. unlimited rest
7. regulatory risk

Question 3

Market Order?

Answer 3

order to buy or sell a specified number of securities at the prevailing market prices
All orders not bearing a specific price are considered market orders.
Generally, the buyer can expect to pay the ask price, and the seller can expect to accept the bid price. In any case, the trader tries to obtain a lower ask (also known as offer) or a higher bid than the prevailing level.

Question 4

benefit of a market order

Answer 4

he investor is certain that it will be

executed.

Question 5

types of order (6)

Answer 5

market order
limit order
day order
good though order
On-stop sell order
On stop Buy order
professional order

Question 6

Limit order

Answer 6

an order to buy or sell securities at a specific price or better
the order will be executed only if the market reaches that price or better however no certainty that the order will be filled

Question 7

Day order

Answer 7

an order to buy or sell that expires at the end of the day, if it is not executed on the day it is entered.
All orders are considered to be day orders unless otherwise specified.

Question 8

Good Through order

Answer 8

an order to buy or sell that is good for a specified number of days.
The order is then
automatically cancelled if it has not been filled by the end of the trading session on the date specified in the order

Question 9

On-stop sell order

Answer 9

an order that is specifically used in connection with a
sell order where the limit price is below the existing market price
order is triggered when the stock drops to the
specified level

Question 10

On-stop buy order

Answer 10

an order to

buy a stock at or above a certain price

Question 11

reasons for On-stop buy order (2)

Answer 11

1. To protect a short position when the stock’s price is rising
2. To ensure that a stock is purchased while its price is rising

Question 12

Professional order

Answer 12

If the order of a
client competes with a non-client order at the same price, the client’s order is given priority of execution over the
non-client order. A non-client order is an order for an account in which a partner, director, officer, advisor, or other
employee of a dealer member holds a direct or indirect interest or an arbitrage order.