medium · Market Microstructure
A trader places a 'Stop-Limit' order to sell 1,000 shares of CAT with a stop at $240.00 and a limit at $239.50. The stock is trading at $241.00. Suddenly, bad news breaks and the first trade after the news is at $238.00.
What happens to the trader's order?
- It is cancelled because the market 'gapped' through the limit
- It executes at $239.50 as a 'guaranteed' price
- It is triggered but remains an unexecuted limit order
- It executes immediately at $238.00
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