A stop order is typically placed to limit a loss or protect a profit. Which statement best describes its use?

• A. To buy at the best price
• B. To limit a loss or protect a profit
• C. To sell at any price
• D. To hold until expiration

Answer: (B)

Stop orders are risk-management tools that set a trigger price at which a trade will be executed to cap potential losses or lock in gains. When the market reaches the stop price, the order activates and typically becomes a market order, ensuring you exit a position or enter one at your predefined level even if you’re not watching the price. This mechanism helps prevent further downside after adverse moves or secures profits as prices move in your favor. The other statements don’t fit because a stop order isn’t about achieving the best price every time, nor about selling at any price, and it isn’t simply about holding until expiration.