medium · Market Microstructure lob
A trader places a Stop-Loss Sell order for 1,000 shares with a stop price of 70.00. Overnight, bad news causes the stock to gap down and open at 65.00.
What happens to the order at the open?
- The order triggers and becomes a market order, executing at the best available bid near 65.00.
- The order converts to a limit order pegged at 70.00 and sits unfilled awaiting a price recovery.
- The order executes exactly at 70.00, since that was the stop price the trader specified for the sale.
- The order is simply cancelled by the exchange because price gapped straight through the stop level.
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