Question

Suppose that you short sold 400 shares of Google at the price of $415 per share. Assume that if Google stock price move in a way such that the loss in your position (per share) is $25 or more, then you would like to close your position provided that your loss (per share) is equal to or less than $30. What kind of order should you place? Your answer has to include the name of the order, whether you are placing an order to buy or sell, the number of shares for which the order applies and the information on the prices that the order may require

Answer 1

Position : Short sold 400 shares of Google at the price of $415.

Current loss in position is $25 or more.

It means market price is 415 + 25 = $440 or more.

We want Loss per share is equal to or less than $30.

It means share price 415 + 30 = $445 or less should be for loss equal to or less than $30.

So, We should place stop loss order.

Stop loss order is auto executed when Share price reaches $445.

We have taken Short position, So as to close our position we have to long the shares.

So, we should place Stop Loss order for buying the shares (Long the google stock) at price of $445 for 400 shares.