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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Trading Mechanism

In the Indian exchange-traded equity derivatives market, which of the following best describes the order type 'Stop Loss' when placed to sell?

A stop loss order becomes active only when the market price reaches the specified trigger price. Until then it stays inactive, and once triggered it enters the order book to limit losses on an existing position, unlike a market order, which executes immediately.

  1. AIt executes immediately at the best available price
  2. BIt becomes active only when the market price reaches the trigger priceCorrect
  3. CIt is valid only for the first minute of trading
  4. DIt can be placed only after market hours

Explanation

A stop loss order stays dormant until the trigger price is hit, after which it enters the order book as a limit or market order. It is not immediate like a market order, and it is not restricted to a one-minute window or to after-market hours.

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