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FRM Part I · FRM Exam Part I · Futures Markets

A hedger with a long futures position wants an order that executes at the specified price or better, but he wants it cancelled if it cannot be filled immediately in full. Which order type matches this instruction?

A fill-or-kill limit order matches this instruction: it must be executed immediately and in full at the limit price or better, otherwise it is cancelled. Good-till-canceled orders remain open, and stop-limit and discretionary orders have different triggers or broker discretion.

  1. AGood-till-canceled limit order
  2. BFill-or-kill limit orderCorrect
  3. CDiscretionary order
  4. DStop-limit order

Explanation

A fill-or-kill order must be executed immediately in its entirety or cancelled. A good-till-canceled order stays open, a discretionary order lets the broker use judgment on price and timing, and a stop-limit is triggered at a stop price.

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