You own 500 shares of Great, Inc., stock. It is currently priced at $50. You are going on vacation and you realize that the company will be reporting earnings while you are away. To protect yourself against a rapid drop in the price, you place a stop-limit order to sell 500 shares at $40. It turns out the earnings report was not so good and the stock price fell to $30 right after the announcement. It did, however, bounce back, and by the end of the day it was back to $42. What happened in your account

Question

Alessandra Noble

Business

6 December, 02:51

You own 500 shares of Great, Inc., stock. It is currently priced at $50. You are going on vacation and you realize that the company will be reporting earnings while you are away. To protect yourself against a rapid drop in the price, you place a stop-limit order to sell 500 shares at $40. It turns out the earnings report was not so good and the stock price fell to $30 right after the announcement. It did, however, bounce back, and by the end of the day it was back to $42. What happened in your account

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Chance Ferguson · Answer 1

Reduced by $4000

Explanation:

Your account will be reduced by $4000 this is how it will happen

You sell at $40 and again bought it back at $40

And at the end of the day, it was back to $42

You will lose value as it was $50 before and $42 at the end of the day

Difference = $50 - $42 = $8

loss = $8 x 500 = $4,000

NOTE: However number of shares remain same.