Canadian Securities Course (CSC) Level 1 Practice Exam

What is an on-stop sell order?

1. An order to sell a stock at a fixed price.

2. An order to sell a stock only when another condition is met.

3. A stop-loss order.

4. An order to sell a stock immediately at any price available.

The correct answer is: A stop-loss order.

An on-stop sell order, also known as a stop-loss order, is an instruction from an investor to a broker to sell a security once it reaches a certain price level. This type of order is designed to limit an investor's loss on a position in a security. By triggering a sale once the price reaches a specified level, the investor aims to prevent further loss if the security's price continues to move in an unfavorable direction. The other options are incorrect because: - Option A mentions an order to sell at a fixed price, which is not the same as a stop-loss order where the price at which the sell order is triggered is variable based on market movements. - Option B refers to an order to sell a stock only when another condition is met, which is different from a stop-loss order that is executed when the stock reaches a certain price level. - Option D describes an order to sell a stock immediately at any price available, which is known as a market order and is not the same as a stop-loss order that triggers a sale at a specified price level.