Limit Order Execution in Fluctuating Markets

Hard Equity Market Structure Order Types And Instructions

In the context of equity market structure, various order types are utilized by investors to manage their buy and sell transactions in an efficient manner. For instance, a market order is designed to execute immediately at the best available current price, while a limit order sets a specific price for buying or selling a security.

Consider the following scenario: An investor places a limit order to purchase shares of Company XYZ at $50, with the current market price at $52. The investor also specifies that the order should be valid for the day. Later, during the trading session, the stock price fluctuates to $48. Assuming other conditions remain constant, how will the limit order operate in this situation?

The limit order will execute immediately at the market price of $48.

The limit order will remain open and execute if the stock price reaches $50 or lower.

The limit order will expire and not execute since the market price is below the limit price.

Hint

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