Hi there! I don’t really understand this concept from the practice question. Could someone help explain it to me/point me to what chapter it is so I can brush up on it? Thank you!
1 Like
Hi @Influential_coffee_i, welcome! Sure, happy to clarify. Here’s the key info from the explanation:
When a cash dividend is involved, orders for securities placed below the market are adjusted. The price on buy limits and sell stops is adjusted downward by the amount of the dividend. However, if DNR (do not reduce) is on the order ticket, the order will not be adjusted. Also, remember that if an order specifies a price, but not what type of order it is, it’s a limit order.
Remembering the acronyms SLoBS/BLiSS is a good way to keep track of this:
- Sell limit and buy stop orders are above the market, and won’t be reduced
- Buy limit and sell stop orders are below the market, and will be reduced
Of the choices, there is only one that matches, which is the sell stop:
Sell 200 shares of MS @ $39.86 stop
Here’s the relevant chapter - please let me know if I can explain further:
Got it! That was helpful thank you so much! Happy holidays!
1 Like