Wednesday 23rd January 2002 1 Comment
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A: The new FASTER trading system allows NZ brokers to input orders with start/stop limits or stop loss orders. If you purchase some shares and wish to sell them if they fall past a certain point then you can give your broker a stop loss order.
For example, say I buy some TEL shares at $6.45 and believe they will continue to rise. However, just in case they start to fall, I decide that I will sell them if the price drops below $6.00. I can give my broker a 'stop loss order' so that as soon as the shares drop below my set price, they will be sold. If the price continues to rise, nothing happens.
Puts and calls aren't types of orders. They are derivatives. A derivative gives the holder the right to buy (call option) or sell (put option) the underlying security at a known fixed price (exercise price) up until a known fixed time (expiry date) in the future. Options and warrants can be traded prior to exercising but become worthless after the expiry date.
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