|Author||Topic: Limit Order|
|Having trouble understanding why for a Limit on a buy...you have a lower limit........wouldnt you want to get it as low as possible?? (also for a high sell). Can anyone explain?? Thanks a bunch.
Also side question:
WHen does the OTC market close?? Does it close?? If so, the NASDAQ closes though right??
|Ok, If understood your question correctly, then this is with respect to a Short-sale?
Lets say initially when I made the short-sale I expected the share price to go down so that I can make the expected margin(an imaginary no.). But, later on when things go awry or at least not the way I expected such that I could only make a smaller margin, I would rush to lock in/ place a limit order for buying back.
Hope this helps...
|A limit buy order is not used solely for short sales. In fast I would say that they are used primarily as entry orders for those investors who would like to go long a stock however not have a market order affected by a wide bid ask spread. For example if XYZ corp is trading with a bid of 10.50 and an Ask of 10.75, a market order to buy will be filled at 10.75/share. The market order looks to execute the order as fast as possible. With a limit order, the investor will state that they want to buy XYZ at a specified price or lower. Another example would be using the same bid-ask spread as before but instead of a market order, the investor places a buy limit order @ 10.65. His order will fill IF the stock price falls to, or below 10.65. Using a limit order does not guarantee that an order will fill right away or at all. I have been trading stocks and options for quite a while now and scored >70% on the Derivatives, Equity Investments, and Alternative Investments for the June 2015 Level I CFA exam. I will be glad to help with any question you may have!|