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FRM Part I · FRM Exam Part I · Futures Markets

A trader wants to sell a futures contract currently quoted at 52.00, but only if the price first rises to 55.00, at which point she wishes to sell at the best available price. Which order type matches this instruction?

This is a market-if-touched order to sell at 55.00. It becomes a market order once the price reaches 55.00, which is above the current 52.00 level. A stop-loss sell would be placed below the market, so it does not fit the instruction to sell after a rise.

  1. AStop-loss order to sell at 55.00
  2. BLimit order to sell at 55.00
  3. CMarket-if-touched order to sell at 55.00Correct
  4. DStop-limit order to sell with a stop of 55.00

Explanation

A market-if-touched order becomes a market order once the price reaches the specified level, and a sell MIT is placed above the current price. A stop-loss sell is placed below the current price, so it is wrong. A limit sell at 55.00 would also execute only at 55.00 or better, but it is a resting limit order, not a market order at the best available price.

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