Question

You spend a full week studying the situation of a firm. The outlook is very positive and you know the firm is solid. Right now, the shares are selling at $15. However, according to your analysis, the company is worth roughly $10 per share. What type of order should you place with your broker if you want to buy, but not over pay for the shares?

Answer 1

Solution.>

Shares are selling at $15, but according to our analysis we think they are overvalued and it would be worth only $10. In this case we can place a Limit-Buy order with our broker, by setting the limit to $10. In this type of order, the trade will happen only when the stock price goes $10 or below at any point of time, otherwise a trade will not happen. In this way we can have shares at its worth and we are also not overpaying for the shares.

Note: Give it a thumbs up if it helps! Thanks in advance!