exam 2003 MC8

[toms]

Answer E indicates that limit buy doesnt accompanies short sales
but for me its clear that some one who slaes shorts would send the limit buy order
to buy shares at their low price and to realize gains on short selling
so I dont understand why this is wrong !

[Rocky]

Stop-buy orders are often used with short sales. That way, if the price starts to rise, you want to buy before it gets too high (rising stock prices are what you're betting against).

You normally wouldn't want to use a limit-buy since the stock price may keep falling below the limit-buy price. You want the price to keep falling, so you'd instead keep an eye on it and place a market order when you are happy with your gain from the short sale.

[Uncle Gary]

toms messed up, mc#8 on 2003 is a x y I, II, III match. x is limit buy, y is stop buy, I is buy when stock falls below value, II is often accompanies short sale and III is buy when rises above value. The given answer is e, but should it not be D? Stop buy often accompanies short sale, and is an order to buy when price rises above a given value? Y corresponds to II and III. Is this a mistake or am I in that much trouble tomorrow?

[BirdMan]

toms messed up, mc#8 on 2003 is a x y I, II, III match. x is limit buy, y is stop buy, I is buy when stock falls below value, II is often accompanies short sale and III is buy when rises above value. The given answer is e, but should it not be D? Stop buy often accompanies short sale, and is an order to buy when price rises above a given value? Y corresponds to II and III. Is this a mistake or am I in that much trouble tomorrow?

so y corresponds to 2 and 3, answer = E. D is y corresponds to 1 and 3.